23 June, AtoZForex – The results of EU referendum polls are still causing chaos in the foreign exchange markets. Daily British pound range has beaten Black Wednesday 1992; after rallying above 1.5015, pound dropped to 1.32270 against US dollar, resulting in 7.4% devaluation - the biggest in history.
How things were on the Black Wednesday
16th September 1992 was officially called the Black Wednesday. It's the day when British Conservative Government was forced to take off the British pound from the European Exchange Rate Mechanism (ERM) after not being able to keep it above its agreed lower limit within the ERM.
Back in 1993, George Soros “the man who broke the Bank of England” speculated about the potential weakness in sterling’s basket peg in the European Exchange Rate Mechanism, which caused British pound to collapse. That day was one of the darkest days for London foreign exchange market. During that time, one of the most high-profile currency market speculators, Mr. Soros earned more than £1 billion through short-selling the British pound.
Pound range has beaten Black Wednesday: what’s next?
The hectic situation is likely to go on in coming hours. The daily range for the GBPUSD has passed over 10 cents (1000 pips), while the move in GBPJPY surpassed 1500 pips. Earlier today Britons voted to leave the EU; this historical event took markets off-guard despite months of preparation. It swept the global equities off the table and increased the demand for safe haven assets such as the Japanese Yen. Gold prices are also on the move higher, experiencing swings from $1252 to over $1356 and breaking new year to date highs.
European equities have also fallen under serious sell-off. STOXX Europe 600 have devalued more than 6.3%. FTSE 100 devalued by 4.35%. DAX is lower 5.7%, and CAC 40 is down 7.37%.
Meanwhile, safe haven flows into Japanese Yen have increased the odds for further Bank of Japan easing as increased value of the Japanese yen hurts Japanese exports and inflation. In contrary, central banks like Bank of England and European Central Bank will now be able to boast about their measures finally hitting the set inflation targets.
See also: Effect of Brexit on Pound
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