by Ritu Singh, Market Development Manager, Corporate Treasury and Alex Goraieb, Head of FX & Corporate Treasury Market Development Europe, Thomson Reuters
How have the unprecedented macroeconomic and political events of 2016 affected treasurers?
Geopolitical events have had a bigger impact in 2016 than in recent years. Brexit was the most prominent example of populist politics with the electorate exercising its dissatisfaction with the status quo and fuelling a growing trend of reverse globalisation.
FX volatility is now less driven by macroeconomic trends but more by political risk. The recent dramatic movements in sterling can be directly correlated to speeches by politicians or government officials- recently witnessed with the extreme volatility in GBP following the rollercoaster speculation surrounding the hard vs soft Brexit decision. There has been some speculation around the GBP flash crash being sparked by comments originally attributed to the French president François Hollande regarding the European response to a hard Brexit being recycled in the media. This however is yet to be proved.
Political instability in the Middle East and Africa has led to the largest involuntary migration since the Second World War. This has unwittingly fuelled the populist politics within developed Europe, further exacerbating the protectionist attitude and popularity of extreme politics. This is not confined to Europe, but indeed contributed to an anti-globalisation, anti-free trade business environment in which most MNCs thrive.