Brexit and the Effects on the Value of the Pound and the Euro
Ever since the UK voted to exit the EU, there has been great volatility in the value of the pound and the euro. The markets don’t like uncertainty and there has been nothing but this since the referendum vote.
Once the UK finally leaves the EU, there will then follow an “implementation period”, which is expected to last for a period of 21 months following the exit. This period is essential to prevent an economic fallout on both the UK and EU sides.
Some critics see this extension period as a way to prolong the UK’s EU membership whilst going out negotiating their own treaties and trade deals, which could be disadvantageous to the EU. This was shown in a rally against the Euro of around 0.50% and the USD of 0.60% when this agreement became public knowledge in March last year.
The Brexit process has and will continue to present challenges to the British pound sterling. There are almost certainly going to be more volatilities before the process is complete, with most big changes going to be centred around key diplomatic and political events.
From the massive losses in the first few hours after the referendum vote for Brexit, there has been a slow and steady growth of the pound, with some spikes and losses. The GBP is still a long way from returning to its former glory after these fundamental transformations. For investors, this represents an opportunity, especially when it comes to trading GBP and Euro, as well as trading euros to dollars.
Of course, even after Brexit is finally concluded, the overall economic growth of the United Kingdom will in part be impacted by the Bank of England’s (BOE) monetary policy decisions and the trade deals the UK manage to make. Nobody really knows what the future direction of the UK will be.
There is also the chance that the UK will not even leave the EU, which is a possibility given the parliamentary stalemate. One idea being tabled is that there might be a 2nd referendum, which could lead to more uncertainty. Even the result of a 2nd referendum would provoke more uncertainty. Would a second leave vote lead to a “no deal” Brexit, increasing risk, or will the UK vote to stay, likely leading to a constitutional crisis? Only time will tell!
To keep up to date with the latest exchange rates, check out Mconvert.
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