Brexit and its strong impact on Currency Exchange Rates – 20/03/19

The monumental Brexit has yielded political, cultural and also economical consequences. Here we
explain how the UK’s vote to leave the EU has led to significant Brexit currency impacts like lower
currency exchange rates and the British pound devaluation.

By now it’s hard not to be aware that the UK’s vote for Brexit on 23 June 2016 had a significant impact
on the currency market. But with news of long-term lows for the sterling, record highs for stocks and
arguments regarding whether or not the country is heading for a recession, it can be hard to ascertain
exactly what is going on. Most people don’t need to know how well the UK economy is performing when
sending money overseas; they just want to know what is affecting how much they’ll get.

So what impact has the Brexit vote had on currency transfers, why are the markets reacting the way
they are and what looks set to happen in the future? Foreign exchange provider TorFX explains the
Brexit’s important impact on currency rates.

How has the Brexit affected Pound Sterling exchange rates?

The pound has been consistently on the decline since the results of the referendum became clear on 23
June 2016. An initial sharp drop has been followed by several slumps and a persistent overall decline,
leaving GBP to EUR -15 percent than pre-referendum levels and GB to USD and GBP to AUD down -17
percent immediately after the vote. This means people wanting to exchange pounds into other
currencies are getting significantly less, while people wanting to buy pounds are finding the current
levels particularly lucrative.

After the initial shock, the pound was further weakened by a series of unexpected political
developments and poor data releases. Leading ‘Brexiter’ Boris Johnson cause a drop in the pound after
surprisingly announcing that he would not run for Prime Minister after David Cameron’s resignation. A
huge tumble in the UK’s purchasing manager indices – which measure activity in the manufacturing,
construction and service sectors – sparked another sell-off. Plummeting consumer confidence, forecasts
that sterling could hit parity against the euro, speculation that the government had no solid Brexit plan,
warnings from international figureheads and worries that big businesses may move their operations out
of the UK all combined to pressure the pound lower over the weeks following the referendum.

The tumbles have left the pound as the worst performing currency during the first half of 2016, beating
even the currencies of places such as Venezuela, which is struggling with an estimated inflation rate of
700 percent.

Pound sterling in flash crash

The latest lows struck by the pound were caused by a ‘flash crash’, which happened during the Asian
trading session late on the night of 20 October 2016. Many traders have set up computer algorithms to
monitor the news and automatically make trades when certain parameters are met. It is believed that
algorithmic trading, triggered by news stories concerning French President Francois Hollande’s
comments on Brexit negotiations, caused a huge drop in GBP.
With little demand on the currency markets at that time for pound sterling, a sudden influx of GBP from
automatic selling caused the currency’s value to plummet.

Traders woke up on morning of 21 October 2016 to find GBP to AUD had slumped -2.1 percent, GBP to
EUR and GBP to USD had fallen -2.2 percent and GBP to CAD had dropped -2.3 percent. Trading during
the European session lowered the Pound even further as fears of a ‘hard Brexit’ continued to mire
sterling sentiment.

Has the pound made any attempts to recover?

No currency movement, even the Brexit-battered pound’s, is ever truly unilateral. For the most part the
pound keeps tumbling on an initial shock, recovers slightly but remains around the new low, then
repeats the process. A series of worrying developments have pushed the pound lower and lower, while
positive signs from the UK economy have helped sterling to recover some of its losses, although clearly
not by much.

However, one of the reasons the pound has fallen so far is because the markets are largely holding what
are known as short positions. A trader who shorts a currency expects it to weaken, so they borrow the
currency (the currency is not their native currency) and sell it on the market. Assuming the market
moves as they expect and the exchange rate weakens, the trader then buys back the shorted currency at
a lower price than they sold it for. They can then return the same quantity of funds to their creditor,
keeping the difference made by selling it high and buying it back low.

So the market is currently selling sterling in large quantities, which means GBP is weakening due to the
lack of demand amongst investors. However, once the pound reaches what investors deem to be a
profitable level, they will ‘close’ their short positions by rebuying the pound. This will create a large
demand for the pound, helping it to recover some recent losses.

What is keeping the pound low?

Uncertainty is a currency trader’s worst enemy. The forex market is largely made up of investors looking
to make a profit, so the consensus outlook they hold for a particular currency affects its overall value,
regardless of the impact from companies and individuals looking to move money for practical purposes.

The fact that Brexit is largely shrouded in uncertainty is therefore keeping investors skittish. While the
mass warnings over the negative impact of a Brexit from ‘Remainers’ in the referendum campaign have
helped to damage investor confidence, there is also the perception that the ‘Brexiters’ in government
still lack a real plan.

The fact that there are so many uncertainties regarding the Brexit means that there is always something
waiting around the corner to unsettle markets. Once the initial shock of the vote outcome calmed down,
investors were waiting for a solid timeline for the Brexit. When Theresa May announced the formal
process would be initiated by the end of March 2017, markets reacted dovishly; many were still holding
out hope that the referendum vote would be overturned.

Now that we know we’re definitely heading out of the EU, thoughts have turned to what a post-Brexit
Britain will look like. It seems as though the government is intending to choose controlling immigration
over single market access, which has again worried the markets due to the implications for the UK
economy.
What would boost pound sterling exchange rates?

It is impossible to predict exactly how, when, or even if, pound sterling will recover. There are some key
things to key an eye out for, however.

Firstly, monetary stimulus weakens a currency. If it seems like the Bank of England (BoE) is not going to
cut interest rates further or pump more money into the economy that will be seen as a sign of
confidence in the UK and the pound will likely rise.

There could be strong upside movement for sterling if it seems that the UK will get a favourable trade
deal with the EU. Comments from EU politicians suggesting that they are willing to negotiate single
market access without freedom of movement would drastically boost investor confidence.

While recent political events have shocked the markets to such an extent that they are largely ignoring
key economic reports, UK data will at some point begin to have an impact on currency movement. If
enough data suggests that the UK is in a strong position going into the Brexit – for instance, that
companies are continuing to hire and invest in Britain and not planning to relocate overseas – the pound
could jump.

Anyone needing to move money overseas in the near future should therefore follow the latest currency
news to ensure they’re transferring their money at the right time. You might also want to register with
a leading currency broker and discuss your requirements with one of their currency experts.
 Pound to euro exchange rate: The SHOCK impact Brexit has on the pound REVEALED – 16/02/19

Since the Brexit negotiations started, the pound has had a rough time. During the past two years, the
pound has been on a roller-coaster ride with sterling affected by political uncertainty and fears of Britain
not agreeing on a deal with the EU on time. So what impact has Brexit had on the pound?

What impact has Brexit had on the pound?

The pound to euro exchange rate slumped following the most recent Brexit vote in Parliament on
Thursday, February 14.

At the time of writing, sterling is trading at €1.1410 against the euro, according to Bloomberg.

On Thursday, amendments by Labour and the Scottish National Party were voted down by members of
the House of Commons and in a further blow to Theresa May, MP’s rejected a motion in support of the
PM’s Brexit strategy by 308 to 258.

READ MORE: Pound euro exchange rate: GBP jumps as UK retail sales reveal shock expansion

Ian Strafford-Taylor, CEO of currency expert, FairFX said on Friday: “Following Theresa May’s fresh
defeat last night, there is still a lack of clarity over how Brexit will play out.

“With multiple options still on the table, the UK still faces a lot of uncertainty over exactly how it will
leave the EU.

“Uncertainty is, without a doubt, one of the biggest causes of volatility for currency.

“The pound is yet to return to pre-Brexit rates against the Euro, and today it’s down 13 percent against
Euro compared to the day of the referendum.

“That means holidaymakers heading to Eurozone destinations are now getting £147 worth of Euros less
for every £1,000 they exchange.”

The immediate effect on the sterling following the Brexit referendum saw the British currency decline
sharply in value.

And as the vote on the UK’s withdrawal deal from the EU looms, further volatility is expected.

In recent years, traders have been looking at politics, rather than economic data, which means faster
trading, and a faster pace of change in the price.

Jane Foley, senior currency strategist at Rabobank told the BBC: “If you think abut political uncertainty
being bad, the worst outcome is a hard Brexit.

“If that’s the worst case scenario, it [the pound] will rally if hard Brexit seems unlikely.”

And with the UK scheduled to depart the EU on March 29, which is less than two months away, the talks
over the next few weeks will be crucially important on the pound’s worth.

For now, traders are expecting the pound to remain volatile over the coming weeks as Brexit uncertainty
continues.
 Brexit news: What impact has Brexit had on the pound? Expert reveals exchange rate latest –
19/02/19

The pound to euro exchange rate slumped following the most recent Brexit vote in Parliament on
Thursday 14 February. However, the pound was in recovery mode this weekend, looking to take back
some lost ground after sterling was stuck near one-month lows last Thursday. So what impact has Brexit
had on the pound? Ian Strafford-Taylor, CEO of currency expert, FairFX explained all. “The pound is
down 13 per cent against the Euro and the US Dollar since the day of the Brexit referendum in June 2016
and is still yet to return to its pre-Brexit rates against the Euro,” he said.

“Political uncertainty plays a huge role in the stability of currency and exchange rates and the last thirty-
two months since the referendum has been a prime example of that.

“Whenever there is a parliamentary vote or update on the UK’s negotiations with the EU, we see a spike
in support requests as customers try to understand what the latest developments mean for the value of
the pound.”

Strafford-Taylor added: “There’s been a significant increase in the number of queries from new and
existing customers about the impact of Brexit and what it means for their business and personal
international payments as well as their travel money.

“Brexit is an unprecedented event so it’s no wonder there is heightened anxiety around the
consequences it may or not have.”

It’s possible that people could well benefit economically from Brexit an even make money.

“With the Brexit deadline fast approaching, making the most of improvements in non-euro countries is
key to maximising holiday money and getting more bang for your buck,” Strafford-Taylor said.

“Currency should be a big deciding factor behind holiday planning so savvy holidaymakers should be
keeping a very close eye on amidst the Brexit updates.

“By choosing a destination where the pound is performing well, the amount of money you need to enjoy
yourself while you’re abroad will decrease, allowing you to see more of the world, for much less.

“Using expert currency products for international payments will also help to maximise your return and
minimise any risk.

The currency expert also provided some insight into how transferring money to Europe will be affected
by Brexit.

He said: “As it stands, Brexit shouldn’t directly impact you if you’re sending funds to Europe.”

However, the actual impact of transferring money will not be clear before we know whether the UK will
leave with – or without – a deal.

If there is a deal it’s possible Brexit could see Sterling strengthening. Strafford-Taylor said: “It’s possible
that the pound will strengthen if the UK and EU can agree on a divorce deal, but it all depends on the
deal itself.
“If the market feels the deal isn’t economically favourable to the UK, then we could even see the pound
lose ground.

“The most likely way we could see the pound strengthen is if a deal is agreed that is economically
favourable to the UK.”

Money Saving Expert Martin Lewis has revealed the three things holidaymakers must do before Brexit
happens.
 Brexit news: What impact has Brexit had on the pound? Expert reveals exchange rate latest -
19/02/19

THE POUND has experienced much fluctuation as GBP remains at the mercy of Brexit developments
while the UK negotiates its divorce from the EU. An expert has now explained the full impact of Brexit
on Sterling.

Brexit: GBP drops against Euro after vote

The pound slipped against the euro last week after Prime Minister Theresa May lost the most recent
Brexit vote in Parliament on Thursday. The weekend then saw GBP try to recover its losses and regain
ground. Sterling's fluctuation at the hands of Brexit is nothing new - it's served as a barometer for the
currency for many months. So what is the impact of the UK's divorce from the EU?

Brexit news: What impact has Brexit had on the pound? Expert reveals exchange rate latest

Ian Strafford-Taylor, CEO of currency expert, FairFX explained all. “The pound is down 13 per cent
against the Euro and the US Dollar since the day of the Brexit referendum in June 2016 and is still yet to
return to its pre-Brexit rates against the Euro,” he said.

“Political uncertainty plays a huge role in the stability of currency and exchange rates and the last thirty-
two months since the referendum has been a prime example of that.

“Whenever there is a parliamentary vote or update on the UK’s negotiations with the EU, we see a spike
in support requests as customers try to understand what the latest developments mean for the value of
the pound.”

Strafford-Taylor added: “There’s been a significant increase in the number of queries from new and
existing customers about the impact of Brexit and what it means for their business and personal
international payments as well as their travel money.

“Brexit is an unprecedented event so it’s no wonder there is heightened anxiety around the
consequences it may or not have.”

It’s possible that people could well benefit economically from Brexit an even make money.

“With the Brexit deadline fast approaching, making the most of improvements in non-euro countries is
key to maximising holiday money and getting more bang for your buck,” Strafford-Taylor said.
Brexit news: What impact has Brexit had on the pound? Expert reveals exchange rate latest (Image:
Getty Images)

“Currency should be a big deciding factor behind holiday planning so savvy holidaymakers should be
keeping a very close eye on amidst the Brexit updates.

“By choosing a destination where the pound is performing well, the amount of money you need to enjoy
yourself while you’re abroad will decrease, allowing you to see more of the world, for much less.

“Using expert currency products for international payments will also help to maximise your return and
minimise any risk.

The currency expert also provided some insight into how transferring money to Europe will be affected
by Brexit.

He said: “As it stands, Brexit shouldn’t directly impact you if you’re sending funds to Europe.”
Brexit news: Currency should be a big deciding factor behind holiday planning, the expert said (Image:
Getty Images)
Brexit: Savvy holidaymakers should be keeping a very close eye on amidst the Brexit updates (Image:
Getty Images)

How to get the best exchange rate

Exchange rate: How to get the best deal on your holiday money.

How to get the best exchange rate

Brexit: Martin Lewis discusses how travel could be affected

However, the actual impact of transferring money will not be clear before we know whether the UK will
leave with - or without - a deal.

If there is a deal it’s possible Brexit could see Sterling strengthening. Strafford-Taylor said: “It’s possible
that the pound will strengthen if the UK and EU can agree on a divorce deal, but it all depends on the
deal itself.

“If the market feels the deal isn’t economically favourable to the UK, then we could even see the pound
lose ground.

“The most likely way we could see the pound strengthen is if a deal is agreed that is economically
favourable to the UK.”

Money Saving Expert Martin Lewis has revealed the three things holidaymakers must do before
Brexit happens.
Britons need to watch out for the three key areas of passports, travel insurance and EHIC cards. Should
the UK quit the European Union without a deal, you need to have at least six months left on your
passport from the date of your arrival to an EU country.
 BREXIT
What does it mean for you?

The Consequences of Brexit

The departure of the UK from the EU, or Brexit as it has now become universally known will, without
doubt, affect every person in the UK in some way and impinge upon most businesses either directly or
indirectly.

The preparation for Brexit should have been at least on par with Y2K inasmuch as no one really knows
the real damage that will be done to the economy in the short/medium term.

To dispel certain urban myths that have grown around Brexit, common sense tells us that air travel, for
example, won’t be affected in any way other than getting through airports. the popular holiday
destinations; Spain Portugal and Italy will ensure that British holidaymakers are allowed unfettered
entry into countries.

There is no doubt that there will be a “Brexit impact” for business, whether that is disruption of your
supply chain, dealing with existing customers within the EU or finding new markets. Not all the
consequences will be negative but it is vital that businesses are prepared for every foreseeable
development.

The most visible effect of the Brexit negotiations so far has been the “Brexit pound” relationship. The
foreign exchange market immediately took on the view that Brexit was bad for the UK economy as soon
as the result was announced. Sterling fell from a high of 1.5015 to a low of 1.3315 in the month of June
2016 alone and has resided mostly in a range between 1.3500 and 1.2500 ever since. As the
negotiations ended and Brussels stance hardened, the market concentrated on the prospect of the UK
leaving with no deal. Following the disagreement over the Irish Backstop, a no deal departure became
more possible and the pound hit its post-referendum low.

The lack of desire for a no deal Brexit is one of the few matters that Parliament can agree upon although
several Brexiteer MPs considered it to be an important bargaining item that the Government should
have retained in its “armoury”.

Eventually, we have reached the point we are at with less than a month to go until March 29th. The
Prime Minister is still, ever more frantically, trying to persuade EU Negotiators to agree legally binding
changes to the Backstop agreement while at home she has been forced to concede to a meaningful vote
at which if her proposals are rejected two further votes will take place.

The first will be on Parliament’s approval for a no deal Brexit, then if (when) that is voted down, a vote
to delay Brexit entirely. The vote to delay will anger Brexiteers who may try to wrench control of Brexit
from the Prime Minister’s grasp.
Brexit Risk Management

The assessment of risk to your business should have been completed but the most obvious decision
should be to mitigate every possible financial risk. If you are a buyer of currency to pay suppliers you
should have considered hedging 100% of your exposure as far out as a year. Buyers of Sterling in
settlement of foreign currency receipts should have placed orders to ensure the future value of currency
receipts.

The Brexit exchange rate impact risks are not equal. A no deal Brexit could see Sterling fall to 1.2000
versus the dollar, while any rally a softer Brexit would be limited by continued uncertainty.

There will also be a “Brexit effect” on the euro, which while not as profound as on the pound will add to
the current economic slowdown engulfing the Eurozone. It will pay to hedge exposure between Sterling
and the single currency as the outcome following Brexit will be unpredictable.

It is almost impossible to say how long markets will be affected by the fallout from Brexit as the entire
UK and Eurozone economic picture will be entering an entirely new and never before seen paradigm.