Last Friday we saw one of the biggest days in financial markets of all time with the surprise announcement that the UK have voted to exit the European Union. Although this won’t take effect for at least 2 years, the impact of the referendum was instant with foreign exchange markets reacting strongly and global stock markets seeing daily falls greater than during the Global Financial Crisis.
If we were to show how major global currencies faired in comparison to one another in the hours immediately following the announcement, then this basically sums it up; GBP < Euro < RUB < AUD < CAD < USD < JPY. So unexpected was this decision by the Brits to the market that the pound Stirling hit 1 year highs and 10 year lows against the USD within a couple of hours either side of the announcement. The stronger USD against most other currencies did see US export derived currencies including corn, wheat and soybeans weaken immediately following the announcement.
The weaker GBP and Euro could have a negative impact on our competiveness into export markets, however Aussie wheat hasn’t been competitive into these markets anyway due to the large sales of German and French wheat into Egypt and Middle East of late. On the positive, Aussie wheat is being priced more favourably into Indonesian markets last week than previously before that so hopefully not all is lost.