The immediate aftermath of Britain's exit from the European Union (EU) – known as "Brexit" – had all the hallmarks of a major financial crisis. And the narrow victory of British citizens that wanted to leave (51.89%) versus those who wanted to stay (48.1%) only added to the suspense.
Once the referendum results became official, global financial markets, led by a collapse in Eurozone assets, went into a tailspin.
ETFs tied to British stocks like the iShares MSCI United Kingdom ETF (EWU) fell 13.16% from June 23 to 27, while the CurrencyShares British Pound (FXB) dropped 10.03%. The rest of Europe's stock market, as tracked by the Vanguard European ETF (VGK) followed suit by crashing 10.90% in just a matter of days.
The CurrencyShares Euro ETF (FXE), which is linked to the euro's performance, held up much better but still managed losses of 2.56%.
All the steep losses suffered as a result of Brexit have since subsided but prices have not rebounded to levels that existed before the vote.
British and European equities were down only 4% and 4.6% as of the close Thursday, June 30 compared to double-digit losses just a few days before. Although the British pound is still down around 9% since the referendum's results, some see a major buying opportunity.
"If you believe, as I do, that the pound will not be allowed to sink too far, it makes sense to go long the pound," said Charles Sizemore at Sizemore Capital. "While there is a lot of bad blood between the UK and the rest of Europe right now, no one wants to see the UK fall into a genuine debt or currency crisis."
Back in September 1992, when George Soros "broke" the Bank of England, the pound fell around 4% or about one-third less than it did the night of the Brexit referendum announcement. This time around, Soros was long, not short the British pound, but reportedly made money in other markets because of his bearish global outlook, according to Bloomberg.
