The shock result of the Brexit referendum in June last year caused the British Pound to plummet to its lowest level since 1985, leading to lower exchange rates and uncertainty in the currency markets.
The Pound dropped further after the triggering of Article 50 in March 2017, and further still as the UK’s snap general election resulted in a hung parliament.
In late June, however, Sterling bounced back against the Euro after Theresa May’s performance in an EU summit dinner in Brussels, and has since continued to fluctuate.
How can we begin to plan currency exchange strategy as the future of the weakened British Pound remains uncertain in the wake of Brexit?
A weaker pound means other world currencies, for example the Euro, Dollar, Yen, and Renminbi, are comparatively stronger, providing more buying power in the UK market. This provides good opportunities for international investors, which can take advantage of the weaker pound in this uncertain market. For the same reason, exchanging Sterling to foreign currencies is not advisable in the current climate.
Now is a good time for overseas investment in UK properties. Nationwide has reported that house prices fell by 0.4% across the country in April, and forecast prices going down in the future.
International students studying in the UK will enjoy more spending power, however UK students studying abroad may feel a squeeze in their wallets. Parents sending money abroad should keep an eye out on fluctuating markets, and where possible, carefully decide when to exchange and transfer funds.
Hedging may be an effective strategy to limit the impact of currency fluctuations. This insures against future negative currency movements with a forward contract, ensuring a transaction occurs with a favourable rate, even if rates change before the trade is made. Hedging can be risky, however, as This is money explains, as movements in currency are difficult to predict.
If the UK fails to negotiate a trade deal with the EU, consumers and businesses can expect increased costs resulting from new tariffs and custom checks.
Despite this, GBP’s decreased value means that trading in the UK may be a very attractive option for countries outside of the EU such as the US, Canada, New Zealand, and Norway.
Ultimately, post-Brexit developments will be a product of global and EU trade deals which are currently under negotiation and too tricky to predict. Future plans must be flexible and you should prepare for all possibilities, whether that be continued access to the single market, or no trade deal at all.
Of his predictions of the key changes in currency post-Brexit, Ian Wright founder of, MoverDB.com, says: Firstly, I expect we’ll see the pound to continue to slip against the Euro for the first couple of years after Brexit, and it will likely reach parity with the Euro by 2020. However, it’s tough to say what will happen with the pound against the US dollar given Trump’s unpredictability.
“Secondly, if the UK fails to negotiate trade deal with the EU, I expect to see the economy to enter a relatively deep recession that will probably last several years until the economy can readjust. This probably isn’t going to be good for the pound either.”
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