Brexit political fallout will be felt more widely - SocGen

Kit Juckes, Research Analyst at Societe Generale, notes that the yen has gained across the board and is the only major currency to have risen against the US dollar, which has rallied by over 2 ½% on a trade weighted basis.

Key Quotes

“But concern about the economic fall-out in Europe is likely to see the Euro fall further in the weeks ahead too – it’s actually held up rather better than I for one expected but a drop to 1.06 in EUR/USD seems likely. Political fallout has already seen Scandinavian and CEE currencies fall on concerns about what this means for the EU and it’s far too early to fade those moves.

The global economic effects will be modestly negative – which would matter less were the global economy in better shape – but UK voters are not the only ones to demand change. So even if the direct economic impact is modest, it is too early to buy dips in AUD, NZD, and indeed most of EMFX. We’ll write a lot about all of that in the days ahead but today’s conclusion is that the economic fall-out will be biggest in the UK but not negligible in the EU. The political fallout will be felt more widely and that is what will sustain risk aversion for now.”