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Opinion: Markets got it badly wrong – now the shock waves begin

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“The result of the UK’s referendum has sparked pandemonium in financial markets as the leave campaign has proved victorious after securing 51.9% of the vote.

With strong rallies in the pound and UK equities over the past week the result was deemed by some to be a foregone conclusion despite the vast majority of polls showing both sides fairly evenly split.

The pound-dollar traded at its highest level of the year last night shortly after 10pm when the voting booths closed whilst the FTSE futures continued their recent face-ripping rally.

“However, in what will with hindsight surely be seen as a classic example of irrational exuberance traders buying near these highs assuming a victory for remain were wrong – and badly at that.

The turmoil that followed represented sheer panic as long positions rushed for the exits seeing the GBPUSD drop over 10% to print its lowest level in 31 years and FTSE futures falling not much less by around 9%.”

David Cheetham is an analyst at XTB.com

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