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Brexit vote 2016: the night the pound fell 10%
As polls closed on 23 June 2016, the pound was near $1.50. Markets expected Britain to stay in the EU. By morning, "Leave" had won, and the pound had fallen to about $1.32, its lowest since 1985.
The question
On 23 June 2016, the UK held a public vote, called a referendum, on one question: should it stay in the European Union or leave?
The campaign was long and loud. Polls were close, but most of them leaned toward "Remain". Betting markets leaned the same way.
Traders priced it in. In the days before the vote, the pound rose. As polls closed on the night, it touched about $1.50, its highest level of the year.
What happened
The night of the count
Results came in area by area through the night, as UK time ticked past midnight.
Early results from places like Sunderland showed "Leave" doing better than expected. Traders started selling the pound.
As more results arrived, the selling grew. By the early hours, it was clear: Leave was winning.
The result
The final count was 51.9% Leave and 48.1% Remain.
That morning, 24 June 2016, Prime Minister David Cameron, who had campaigned to stay, announced he would resign.
The moment everyone remembers
In about six hours overnight, the pound fell from about $1.50 to as low as about $1.32. That's more than 10% at the worst point.
- It was the pound's lowest level against the dollar since 1985.
- Over the day, it lost about 8%, by most counts its biggest one-day fall since modern floating exchange rates began in the early 1970s.
- Stock markets in Europe and around the world fell sharply. Investors rushed into safer assets.
For a major currency, a move like that in one night is very rare. The pound usually moves less than 1% a day.
What came after
The pound didn't bounce back quickly.
- In August 2016, the Bank of England cut interest rates to 0.25%.
- On 7 October 2016, in thin trading in Asian hours, the pound had a "flash crash". It dropped from about $1.26 to about $1.18 in moments, then mostly recovered. The exact cause was never confirmed.
- On 29 March 2017, the UK formally started the process to leave.
- On 31 January 2020, the UK left the EU, with a transition period to the end of that year.
The FTSE 100, the index of big UK companies, recovered faster than many expected. Many of those firms earn money abroad, and a cheaper pound made those earnings worth more in pounds.
What it teaches
1. "The market expects it" is not the same as "it will happen"
The pound rose before the vote because traders expected Remain. That means the surprise had more room to hurt. When a market has fully priced one result, the other result can move it far and fast.
2. Know what's on the calendar
The vote date was known months ahead. Anyone holding pound trades overnight knew a coin-flip event was coming. An economic calendar is your list of these days. Many careful traders simply stand aside on them.
Before a big scheduled event, ask: "If this goes the way nobody expects, what happens to my trade?" If you don't like the answer, close it or cut the size before the event, not after.
3. Overnight moves can skip your stop
A lot of the fall happened while most of Europe slept. Prices jumped in steps. Stops filled where the next price was, not where they were set. Our guide to weekend gaps explains the same risk across a weekend.
4. Thin markets move further
Both 24 June and the October flash crash happened when fewer traders were active. Fewer buyers and sellers means each order moves the price more. Check our GBP/USD page for when the pound is busiest and quietest.
What it doesn't mean
- It doesn't mean polls are useless. They were close. Close polls mean real uncertainty, not a safe bet.
- It doesn't mean anyone could have known. Some traders bet on Leave and gained. Many more bet the other way. Picking the result was a guess for almost everyone.
- It doesn't mean big news always crashes markets. Sometimes the expected thing happens and markets barely move. The size of the move depends on the size of the surprise.
- It doesn't mean the pound's fall was "the market's opinion" of Brexit. It was a fast repricing of uncertainty, and part of it reversed over time.
Timeline
| Date | Event |
|---|---|
| 23 Jun 2016 | UK votes; pound near $1.50 as polls close |
| 24 Jun 2016 | Leave wins 51.9% to 48.1%; pound falls to about $1.32; Cameron says he'll resign |
| Aug 2016 | Bank of England cuts rates to 0.25% |
| 7 Oct 2016 | Pound flash crash to about $1.18 in Asian hours |
| 29 Mar 2017 | UK formally starts the leaving process |
| 31 Jan 2020 | UK leaves the EU |
| 31 Dec 2020 | Transition period ends |
Questions
How much did the pound fall after the Brexit vote?
It fell from about $1.50 as polls closed to as low as about $1.32 overnight, more than 10% at the worst. Over the day, it lost about 8%, its lowest level against the dollar since 1985.
What was the Brexit vote result?
51.9% voted to leave the European Union and 48.1% voted to remain, in the referendum on 23 June 2016.
What was the pound flash crash in 2016?
On 7 October 2016, in thin Asian trading, the pound dropped from about $1.26 to about $1.18 within moments before mostly recovering. The exact cause was never confirmed.
When did the UK actually leave the EU?
The UK left the EU on 31 January 2020, with a transition period that ended on 31 December 2020.
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