Monday, June 27, 2016

COTW: Pound Hits Thrity-one Year Low

More: Political fallout over the Brexit vote continues in Europe. thirty-eight labor shadow ministers have resigned to express their lack of confidence in Labour leader Jeremy Corbyn. A vote among by 150 Labour members to oust him is expected shortly. Corbyn's leadership during the Remain campaign was ineffective, and his ministers concluded a new party leader is needed in a new general election that may be held shortly. More than 17 million people voted to leave the EU. Corbyn vowed to fight on as leader and appointed replacements. Nicola Sturgeon, leader of the Scotish government, created another tremor when she told the press that it was highly likely that another independence referendum would be held during the official two-year negotiation period. Scotland vote 62% in favor of remaining in the EU. She said her government would prepare a referendum bill for consideration by Scotland's devolved parliament.

{27.06.16}US Person has always thought the pound was over-valued, pegged artificially high at around $1.50 a pound, based on the relative strength of the two economies. Perhaps that level constituted a "gentleman's agreement" between two Anglo-Saxon countries. Nevertheless, Brexit has worked its magic on the pound as it plunged to a thirty-one year low against the dollar:

Investors do not think much of the UK's prospects outside the European Union. Apparently neither do the ruling elite of Britain because their overtures for informal talks have already been rejected by the Union. The leaders of Germany, France and Italy insisted today that UK comply with Article 50 by notifying the Union of its intention to exit.  They will not sit still for British leaders using the referendum results as a bargaining chip to again renegotiate the country's membership.  Indicative of the troubles to come, S&P has downgraded UK's credit rating by two notches.