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Eurozone Leaders Totally Unprepared For Brexit Vote Sending Forex Traders Deeper Into Risk Off Mode

By:
Barry Norman
Updated: Jun 27, 2016, 07:09 UTC

Uncertainty and stress continued to dominate trading in the Asian session on Monday morning.  Safe haven assets soared adding to Friday’s rally. Gold

Eurozone Leaders Totally Unprepared For Brexit Vote Sending Forex Traders Deeper Into Risk Off Mode

Uncertainty and stress continued to dominate trading in the Asian session on Monday morning.  Safe haven assets soared adding to Friday’s rally. Gold added another $7.75 to trade at 1330.15 while the US dollar saw huge gains. The greenback is trading at 96.41 up by 78 points. This is a very unusual situation as gold and the dollar do not move in tandem but in opposition.
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Not only did traders move to the safety of the US they ran to the Japanese yen which is upsetting the entire economic situation in Japan. The yen is now trading at 101.80 against the dollar. The dollar saw huge gains in the morning while the yen gained 43 points in the USD/JPY trade. Against the weak euro the yen saw gains of 162 points to 112.02. The euro took a big hit as problems continued in Spain with the election serving no purpose. The government is just stuck. In France Marie LePen is calling now for a French referendum and the Scottish government which voted to remain in the Eurozone are now saying that they will call for a new vote for Scotland to remain in the United Kingdom. It seems that Europe is crashing all around. The stress and uncertainty after the surprise vote last Thursday is leaving the markets stressed.

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EUR/USD Breaks below 1.10

Prime Minister David Cameron resigned and said that he would leave the official triggering of Article 50 to his successor but it could be more than 3 months before a new Prime Minister is installed which could spark a call for a vote in the UK. The pound dropped another 281 points in the morning to trade at 1.3399 while the EUR/GBP added 70 cents as the euro was not as weak and the pound.

The Spanish election results on Sunday are a promising vote of confidence from the Eurozone’s fourth-largest economy, if not a sign of a population that has heeded the Brexit fallout as a warning. The conservative People’s Party (PP) of acting Prime Minister Mariano Rajoy has won most seats in Spain’s parliamentary election but is short of a majority. Mr Rajoy had sought to portray the election as a choice between economic stability and the uncertainty offered by Unidos Podemos (“Together We Can”), a coalition led by anti-austerity party Podemos that emerged just two years ago in protest against austerity measures demanded by Brussels. Spanish elections delivered a hung parliament for the second time in six months on Sunday, adding to political uncertainty in Europe after last week’s shock Brexit vote and piling intense pressure on Spain’s warring politicians to form a government.

Marie LePen, the leader of the French far-right National Front party, said the British Brexit vote is a “victory for freedom” and called for all countries to have referendums on their European Union membership Friday.

“Victory for freedom! As I’ve asked for years, we need the same referendum in France and in the EU countries,” Le Pen tweeted.

The euro is down 115 points at 1.1002 and it is expected to continue to decline as EU leaders have called a meeting for later today to discuss their emergency responses to the Brexit vote while the ECB is also starting rounds of meeting to discuss adding stability to European markets.  Today Merkel will host French President Francois Hollande and Italian Premier Matteo Renzi in Berlin to prepare for this week’s Brussels summit and discuss the way forward. Not only do they have starkly different visions for what Europe should look like, Germany’s economic and political weight makes the trio so lopsided that finding common ground will be difficult.

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EUR/GBP Climbs after UK Uncertainty

Instead of a plan, the three are likely to offer reassurance that Europe is not on the verge of collapse as well as encouragement for the remaining 27 to work together and strengthen the union.

But so far, Europe’s leaders can’t even agree on when the UK should file the divorce papers. While Steinmeier and his guests, along with Jean-Claude Juncker and other Brussels officials, demanded the UK trigger the EU’s exit clause immediately, Merkel urged patience. There was no need to get “nasty” with the Brits, she insisted on Saturday.

For some, the regrets started immediately after the stunning news of the Leave vote was delivered early Friday morning. Twitter has been dotted with repentant posts by some of the 17.4 million people who voted to Leave. One said: “Hum I think I kinda regret my vote, I had no real reason to pick what I did!!”

Others have taken matters further. A petition calling for a second referendum reached 3 million signatures since Friday, the most ever gathered by a popular motion to Parliament. The House of Commons, the lower Chamber, has a duty to debate it, but political experts say it has zero chance of being successful.

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