This week’s trade news was dominated by coverage of the referendum in which voters in the United Kingdom elected to leave the European Union. The outcome was somewhat surprising, as most odds-makers had projected the “remain” side to prevail in a down-to-the-wire vote. But in the end, UK voters favored leaving the EU by 52 percent to 48 percent. British Prime Minister David Cameron, who supported remaining in the EU, announced that he will step down in October.

Markets around the world reacted to the great uncertainty associated with the UK decision. This included a rush to safe-haven currencies like the yen and the U.S. dollar, and a dramatic drop in the British pound. The pound plunged by about 10 percent at one point to $1.33, though it recovered to post about an 8 percent loss at $1.36. The euro, which has averaged close to $1.13 since April, dropped about 2 percent to $1.11. The Japanese yen surged to Yen 99 against the U.S. dollar – a gain of 7 percent from Thursday and the strongest since November 2013 – while other Asian currencies declined. The yen is now trading closer to 102 yen per dollar.

Next week the UK is expected to officially notify the EU of its intention to leave, at which point the European Council will begin preparing guidelines for negotiation of the UK’s departure. More details on this process are available in this European Commission fact sheet.

USMEF will be following developments in the EU very closely in the wake of the so-called “Brexit” vote. This is an unprecedented development that will have implications that are impossible to predict today. However, to the extent that the UK’s decision to leave the EU contributes to economic turmoil in Europe, this will be of considerable concern to U.S. meat companies that have made significant investments in the EU market. More generally, the UK has been a moderating voice within the EU on trade and regulatory issues, and we will be watching for signs that the UK’s departure from the bloc results in a hardening of the EU perspective in these areas, which are of significant interest to companies doing business in Europe.