After the voting for Brexit in June 23, 2016, stock markets fell into a turmoil
ID: 2740295 • Letter: A
Question
After the voting for Brexit in June 23, 2016, stock markets fell into a turmoil globally on Friday, June 24 and Monday June 27. Investors sold off stocks in stock markets on these two days.
If lenders in Eurodollar and Eurocredit market reacted in the same way as investors in stock market, what should have happened to LIBOR in those three days, June 24 and 27? Explain as much in detail as possible.
Check actual 6-month LIBOR on June 23, 24, and 27, and see if LIBOR has moved as you explained in (1). If it has not, what should be the reason?
Explanation / Answer
After Voting in Brexit in June 23,2016 stock market fell into turmoil globally. Investors sold stock imarket, As the same can be seen from FTSE 100 , Major European Index , whill felt from 6261.20 opening on 23rd June 2016 to Closing of 5982.20 on ground of unstablity in Economic conditions based on Brexit and exit of United Kingdom
Few facts to reflect the same are as follow :
If lenders in Eurodollar and Eurocredit had reacted in similar manner as the stock market value of Euro to dollar must had falled drastically. There would had be a major devaluation of Euro, and this would had led to a major financial crises.
But this did not happened as European unioun regulated the value of Euro, and tried to control its devaluation against dollar by managing its foreign exchange reserve and restoring confidence building measures. Inclusing a press conference by David Cameron , Prime Miniter of United Kingdom and European Unioun joint statement.
However. 6 Months LIBOR actual rates were as follow
LIBOR had not moved as expected , as its devaluations was restricted based on control measures imparted and is thus as explained the Fiscal and monetary policy along with sentiments building measures had helped to sustain a major downfall in LIBOR rates as well as major currency devalation as was seen in stock market.
Date Opening Closing Jun 27, 2016 6,138.70 5,982.20 Jun 24, 2016 6,338.10 6,138.70 Jun 23, 2016 6,261.20 6,338.10