Market Event, General

5 Markets affected by Brexit

Ben Weiss, Thursday, 26 September 2019

5 Markets affected

We've gone for just five markets, but truth be told this list could have been in the thousands. Like a black hole, Brexit has indiscriminately sucked everything into its chaos, and few markets seem to be safe. But some are naturally more affected by Brexit news and its developments than others. Here are the ones we think are most likely to be affected by the departure. 

GBP/USD

Unsurprisingly, GBP/USD is a market that’s highly susceptible to Brexit changes. Being the third most commonly traded foreign exchange (FX) pair, behind EUR/USD and USD/JPY, it makes up 9.2% of total FX trades.

With confidence in the pound fluctuating as traders try to determine its future strength, most FX pairs consisting of GBP are in the same unpredictable boat. Uncertainty surrounding the future of the UK doesn't impart confidence in GBP. Equally, any news coming from Brexit that offers clarity and implies something beneficial to the UK could have a positive impact upon GBP/USD.

As one of the most trusted and valued currencies, USD will be used as a measure to determine just how strong the pound is. 

Brexit high: 1.50189 in June 2016.
Brexit low: 1.17773 in October 2016.

GBPUSD Brexit

GBP/EUR

With the pound and the euro being the currencies most commonly used between the two parties involved in Brexit, the UK and the EU respectively, GBP/EUR is an obvious choice for this list.

Free movement is still available for citizens residing within the EU, so GBP/EUR is still very much in demand. However, every turn in the road towards Brexit affects the price, and the FX pair has experienced heavy fluctuation since June 2016. Similarly to GBP/USD, GBP/EUR will be looked upon to determine the strength of the pound, as the FX pair has a direct link to Brexit. 

Brexit high: 1.31573 in June 2016.
Brexit low: 1.04660 in October 2016.

GBPEUR Brexit

Bitcoin

Cryptocurrencies have taken the financial markets by storm over the past few years. The last decade has seen a mass migration from certain aspects of our lives from the real world to the virtual. Think about DVDs for an example. Where physical copies were once bought in shops, nowadays streaming in the online world has taken over. 

Currency, in the form of cryptos, has equally made that transition across to the virtual world, and that is key to why Bitcoin has especially been affected by Brexit. With people’s confidence in the pound wavering, a seemingly much safer way to maintain the value of a currency is to transfer it into something that is more stable - in this case something decentralised. 

Of course, you can never be too sure about a certain currency; any currency is potentially an exogenous shock away from crashing, and Bitcoin has certainly proven to be a risky investment in the past. But many people trust the decentralisation of cryptos over the centralised currencies of the banks, and with Bitcoin being the most popular crypto, it's inevitably going to be affected the most. 

Brexit high: 19529.9 in December 2017.
Brexit low: 3135.8 in December 2018.

Bitcoin Brexit

UK 100

It’s another selection that is predictable, but well worth its spot on this list. The UK 100 is an index compromising of the top 100 UK companies based on market value.

With such weighting being put on the UK 100 as an index in determining how well the UK economy is faring, it becomes highly susceptible to any news coming out surrounding Brexit. Many of the companies on this index have taken measures to counter any effect the departure may have, for instance the likes of Rolls Royce's partial move across to Germany. 

Some of the smaller firms within the UK 100 simply don’t have the capital or means for such drastic alterations, and will thus have to face the consequences of Brexit head on. This is why the UK 100 will be one of the most volatile indices affected by Brexit.

Brexit high: 7903.2 in May 2018.
Brexit low: 5728.6 in June 2016.

UK 100 Brexit

DAX 30

The DAX, similarly to the UK 100, combines the largest 30 German companies in terms of market value together in an index. With the UK being one of their major trading partners, Germany and the UK’s economy are closely integrated.

Car production for one, is one of the largest exports for Germany, and the UK is equally one of the largest importers of German cars. As such, many car manufacturers specifically may feel the brunt of Brexit, and with BMX, Daimler, ThyssenKrupp, Continental and Volkswagen all part of the DAX index (making up just shy of 10% weighting), the DAX could be very reactionary to Brexit progressions.

Brexit high: 13601.2 in January 2018.
Brexit low: 9163.5 in June 2016.

DAX Brexit

 

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