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Brexit: new crisis or new opportunities?


The financial markets have reacted turbulently to the results of the referendum on Great Britain's exit from the European Union, held in late June this year. Despite the falls experienced by sterling and the euro, and also the majority of the world's stock markets, the increased volatility post-Brexit has opened up some fine opportunities for traders who were ready for the turn events have taken.

Goodbye, EU?

So what is this strange concept, "Brexit"? It's very simple: the word comes from "Britain" and "exit". The idea of leaving the European Union had been raised fairly frequently in the United Kingdom—so much so that people had almost stopped reacting to it. And so the results of the referendum on 23 June had the effect of a bomb going off. Nearly 52% of British voters backed exiting the EU.

The news shocked the world financial markets to life, and most of them immediately responded by dropping. US and European stocks slumped; the pound and the euro both nosedived. Investors started urgently redistributing their portfolios in search of replacements for financial instruments that had become too risky. The crisis even hit Britain's stable property market, slashing prices by several percentage points.

Brexits come and they go...

The high volatility actually didn't last too long: the markets gradually returned to a normal condition. Risks are still thought to be somewhat heightened; but, gradually, everything is returning to its usual routine. Especially since it has become obvious that the process of leaving the European Union may drag on for a number of years.

Analysts are not ruling out the possibility that the "scare stories" spread about the consequences of Britain leaving the EU may have been a massive PR operation, carefully planned, with the goal of luring capital away from cloudy Albion to other EU financial centres—in Germany, for instance. In practice, however, investors as well as ordinary Brits can expect many pluses from Brexit as well as a certain number of minuses. So ultimately there is no cause for panic. It is no accident that the Bank of England, at its latest meeting, declined to raise interest rates.

... and trade carries on

The increased volatility after the referendum results were announced created good opportunities to make money on the financial markets. The sales were basically obvious, and there is no doubt that experienced traders managed to do well—selling practically any kind of instrument without cover.

Indeed, many markets recouped their losses quite quickly. The German DAX index has returned to roughly its initial level, and the American S&P 500 even reached new record heights. And all these movements could be predicted quite precisely, on the basis both of fundamental positions and of technical analysis.

As for currencies, the euro and the pound have not yet returned to their previous levels: but the fall soon came to an end, and the current state is one of consolidation. It is difficult to say which direction the break out of this corridor will take; but it makes sense to keep observing the condition of the markets, so as to be able to get on the winning side—whether the bulls or the bears—quickly.

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We would like to remind you that although trading of derivatives on margin may offer many benefits, it is important to note that it also carries a high level of risk. Please click here to read our full ‘Risk Disclosure’ and ‘Risk Disclosures for Financial Instruments & Investment Services’.

RISK WARNING: Trading of complex financial products, such as Stocks, Futures, Foreign Exchange ("Forex"), Contracts for Difference ("CFDs"), Indices, Options, or other financial derivatives, on "margin" carries a high level of risk, and may not be suitable for all investors. The possibility exists that you could sustain a loss of some or all of your initial investment and, therefore, you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading these markets, and seek advice from an independent financial advisor if you have any questions or doubts. Please carefully read our full "Risk Disclosure" and "Risk Disclosures for Financial Instruments & Investment Services". FXFINPRO Capital is the trading name of PFX Financial Professionals Limited, a limited liability company formed under the laws of Cyprus, registered with the Registrar of Companies in Nicosia, Cyprus, under nr. HE 237840 and regulated by the Cyprus Securities and Exchange Commission with license number 193/13.
The CIF license of PFX Financial Professionals Ltd has been suspended by the Cyprus Securities and Exchange Commission until the 24th of December 2016. Please click here