Major political events and announcements and the effect on the exchange rate : the case of Brexit

Abstract

Brexit has been a major “spur of the moment” decision, especially considering that David Cameron solely decided to have a referendum just to be re-elected as Prime Minister in the United Kingdom. Never in his dreams would he have thought that over half of all eligible voters would vote in favour of leaving the European Union. Hence, the objective of this thesis is to analyse whether certain events during the Brexit timeline have an impact on the exchange rate, and furthermore - to what extent. Using the market model of event analysis, there were some central dates that are noteworthy to highlight such as, the referendum result day and Article 50 being triggered. However, it cannot be concluded that the exchange rate was not affected by other dates, time before and after a big event also have a great impact, which this analysis will examine further. Much of the research might illustrate that the specific event-timing does not necessarily affect the exchange rate, it however also shows how important it is to analyse a greater scope of data points.