BREXIT

BREXIT camp wins; UK becomes first country to leave EU

BREXIT, which was looking quite eminent has finally taken place. As at 10.15 am (IST) it only required 3.7 lacs to win. With less than an hour left for the outcome, things are very clear, British leaves the European Union. The leave camp has got 51.8 per cent vote.

UK has become the first country to leave the European Union. BREXIT, was  a political goal that has been pursued by various individuals, advocacy groups, and political parties since the United Kingdom (UK) joined the precursor of the European Union (EU) in 1973. Withdrawal from the European Union is a right of EU member states under Article 50 of the Treaty on European Union.

Article 50 of the Treaty on European Union provides that: "Any Member State may decide to withdraw from the Union in accordance with its own constitutional requirements." Article 50 was inserted by the Lisbon Treaty in 2007, before which the treaties were silent on the possibility of withdrawal. 

Once a member state has notified the European Council of its intent to leave the EU, a negotiation period begins during which a leaving agreement is to be negotiated setting out the arrangements for the withdrawal and outlining the country's future relationship with the Union begins.

Pound at 30 years low against USD at 1985's levels

Great Britain Pound (GBP) has plunged against USD to levels witnessed by the currency pair in 1985, on Friday as result of the referendum on whether to stay in the European Union (EU) showed the U.K was on course to leave, according to latest media projections including that of B.B.C. GBP USD pair is trading at $1.3224 levels and is expected to trade at $1.3000 in coming sessions. 

Interestingly the currency pair traded at $1.5018, a new high only few hours before the polling results started coming in. Experts believe currency markets may have seen this kind of volatility in 1986. At current levels the pound is sharply down by 10 per cent from Thursday's close.

JPY has appreciated and USD has fallen as low as 99.08 yen which is the lowest level since 2013. The pair traded at 106.81 levels when the 'remain' camp appeared to be headed for a win. 

In the Asia Session the pound was trading at 160 yen levels before the BREXIT poll results started coming in. Pound tumbled sharply and could fetch only 133.18 Yen post BREXIT confirmation. 

BREXIT: Impact on Commodities

BREXIT is impacting overall global market and concerns are stopping markets from making gains. The commodity market is also affected because of sudden drop in equity markets and currency markets. Right now, precious metals are gaining in commodity markets. Following are the illustration on various commodities.

Precious Metals

Commodity prices have been impacted on BREXIT day. The precious metals have surged on uncertainty in the global capital markets. The gold prices have increased by 6.64 per cent and is trading at Rs 31835 on commodity exchange. Meanwhile, silver also is trading high by 3.72 per cent and is trading at Rs 42714 on MCX.

Crude

The crude oil futures are trading at 46.94 with a reduction of 6.39 per cent on June 24. The UK has about just 1.6 per cent of world oil demand, so crude should not be too affected by a BREXIT. The crude oil prices may move according to currency fluctuations in global markets. The US dollar may move upwards in short term period. Meanwhile, many research houses are predicting crude oil prices may move more than USD 65.

Industrial Metals

Aluminium, copper, zinc and other industrial metals are also being watched out on BREXIT move. The prices of these metals may hit high in near term if  US dollar strengthens.

Natural gas

The natural gas declined by 1.04 per cent on MCX and is trading at 180.2. There will be impact of BREXIT on natural gas on short term basis. The benchmark National Balancing Point contract is an important reference price for the European gas market. On BREXIT wave, the NBP contract could rise sharply, impacting other gas markets such as the Netherlands.