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Brexit uncertainty and its effect on GBP/USD and GBP/EUR


Everyone around the world by now will have heard of Brexit and how it has directly impacted the United Kingdom as a whole, with constant rallies and marches from “remoaners” as they are colloquially known as. The U.K. held a democratic vote and the public voted to leave the European Union, which is scheduled to officially occur at 11pm U.K. time on Friday 29th March. There have been rumours that Brexit is actually not going to happen because people have claimed that they can hold a second referendum, but Brexit is happening without a shadow of a doubt and this has been confirmed by both the U.K. government and the main U.K. opposition party. Nothing is ever certain regarding the topic of Brexit, but as things stand Britain is definitely leaving the European Union.

The immediate effect that Brexit had on pound sterling, was like I said, immediate. The British pound fell nearly 11% after the results were read out that Britain was going to start the proceedings to start the process of leaving.

GBP/USD Exchange rate chart

As you can see from the chart above, it is apparent how much of an effect the vote had on the GBP/USD pair as the currency began lose strength and did so for a few months. As Brexit is just over the horizon, we must turn our attention to the U.K. and its main currency pairs which are GBP/USD and GBP/EUR. As Britain has trading partners in the EU who mostly have their currency as the Euro, Britain is going to find its currency having a hard time with the eventual loss of value when March 29th comes round.

GBP/USD Exchange Rate Prediction

My prediction for the main currency pair for Britain, which is GPB/USD is for it to experience quite a bit of choppiness whilst the last minute negotiations are taking place. The trade negotiations that are taking place will have a direct effect on how strong or weak the British currency is likely to be, and since America is one of Britain’s main trading partners the likely forecast is for the pound to take a beating. My personal prediction is that this pair will be heading towards 1.22 as all the Brexit effects take place.

GBP/EUR Exchange Rate Prediction

As for Britain’s second most popular currency, the GBP/EUR we are going to witness pretty much the same things happen, with the pair going through periods of chop before we get to the eventual day. Leading up to the 29th March 2019 is going to be tricky because it all hangs on the trade deals and negotiations that Britain manages to forge for itself. Once Britain actually leaves the European Union we can expect the country’s currency to slip to around the 1.10 area, and it may even fall even further but it all depends on the important trade deals and laws that are being dealt with now. Brexit is making trading these currencies a rather difficult task because we have no idea when news regarding trade deals or laws will hit the headlines and whether it will have an immediate effect. Trading Brexit might actually be better after the event has happened, because at least then we will have a clear direction as to where the currency might be heading.

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