Brexit: Global Bearing

When it comes to economic events, investor sentiment is a big deal. The Brexit announcement had two remarkable impacts: the GBP was one of the strongest currencies in the global market. However, Brexit lead investors to cling on to the USD and Yen rather than the GBP, making the latter plummet to drastic lows. Risky assets in GBP became riskier.  The consequence of the announcement showed up on British stocks too, dropping by a 3.2 percent. American shares were down by 3.6 percent, and the Dow Jones Industrial Average lost 611 points. Additionally, the financial hub of London took a serious hit; trade of several securities denominated in Euros would now shift to more potential locations like Paris.

Politically, it was perhaps a well-thought out move; nevertheless, the impending resignation of the Prime Minister David Cameron, and the ongoing lengthy procedure of withdrawal from the EU is sure to take a toll on the political face of the economy. Another agenda to consider were the preferences of the other nations in the UK – particularly, Scotland and Ireland. Both the nations claimed a pro-EU stance now. The UK, or the United Kingdom of Great Britain and Northern Ireland, as it is called, has had an extremely unique administrative system – a common government, but separate legal systems and political systems. Now that there is a division of votes in favour and against the EU membership, it is difficult to witness a future where these nations together would constitute a bigger one.

There are more major costs of this decision. A potential rise in unemployment rate, downfall of house prices, and general unrest among investors are some tentatively predicted consequences. More importantly, trade with EU would become more expensive to Britain, after Brexit.

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