Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
UK House Prices Momentum Tory Seats Forecast General Election 2019 - 8th Dec 19
Why Labour is Set to Lose Sheffield Seats at General Election 2019 - 8th Dec 19
Gold and Silver Opportunity Here Is As Good As It Gets - 8th Dec 19
High Yield Bond and Transports Signal Gold Buy Signal - 8th Dec 19
Gold & Silver Stocks Belie CoT Caution - 8th Dec 19
Will Labour Government Spending Bankrupt Britain? UK Debt and Deficits - 7th Dec 19
Lib Dem Fake Tory Election Leaflets - Sheffield Hallam General Election 2019 - 7th Dec 19
You Should Be Buying Gold Stocks Now - 6th Dec 19
The End of Apple Has Begun - 6th Dec 19
How Much Crude Oil Do You Unknowingly Eat? - 6th Dec 19
Labour vs Tory Manifesto Voter Bribes Impact on UK General Election Forecast - 6th Dec 19
Gold Price Forecast – Has the Recovery Finished? - 6th Dec 19
Precious Metals Ratio Charts - 6th Dec 19
Climate Emergency vs Labour Tree Felling Councils Reality - Sheffield General Election 2019 - 6th Dec 19
What Fake UK Unemployment Statistics Predict for General Election Result 2019 - 6th Dec 19
What UK CPI, RPI and REAL INFLATION Predict for General Election Result 2019 - 5th Dec 19
Supply Crunch Coming as Silver Miners Scale Back - 5th Dec 19
Gold Will Not Surpass Its 1980 Peak - 5th Dec 19
UK House Prices Most Accurate Predictor of UK General Elections - 2019 - 5th Dec 19
7 Year Cycles Can Be Powerful And Gold Just Started One - 5th Dec 19
Lib Dems Winning Election Leaflets War Against Labour - Sheffield Hallam 2019 - 5th Dec 19
Do you like to venture out? Test yourself and see what we propose for you - 5th Dec 19
Great Ways To Make Money Over Time - 5th Dec 19
Calculating Your Personal Cost If Stock, Bond and House Prices Return To Average - 4th Dec 19
Will Labour Government Plant More Tree's than Council's Like Sheffield Fell? - 4th Dec 19
What the UK Economy GDP Growth Rate Predicts for General Election 2019 - 4th Dec 19
Gold, Silver and Stock Market Big Picture: Seat Belts Tightened - 4th Dec 19
Online Presence: What You Need to Know About What Others Know About You - 4th Dec 19
New Company Tip: How To Turn Prospects into Customers with CRM Tech - 4th Dec 19
About To Relive The 2007 US Housing Market Real Estate Crash Again? - 3rd Dec 19
How Far Will Gold Reach Before the Upcoming Reversal? - 3rd Dec 19
Is The Current Stock Market Rally A True Valuation Rally or Euphoria? - 3rd Dec 19
Why Shale Oil Not Viable at $45WTI Anymore, OPEC Can Dictate Price Again - 3rd Dec 19
Lib Dem Election Dodgy Leaflets - Sheffield Hallam Battle General Election 2019 - 3rd Dec 19
Land Rover Discovery Sport Brake Pads Uneven Wear Dash Warning Message at 2mm Mark - 3rd Dec 19
The Rise and Evolution of Bitcoin - 3rd Dec 19
Virtual games and sport, which has one related to the other - 3rd Dec 19
The Narrative About Gold is Changing Again - 2nd Dec 19
Stock Market Liquidity & Volume Diminish – What Next? - 2nd Dec 19
A Complete Guide To Finding The Best CFD Broker - 2nd Dec 19
See You On The Dark Side Of The Moon - 2nd Dec 19
Will Lib Dems Win Sheffield Hallam From Labour? General Election 2019 - 2nd Dec 19
Stock Market Where Are We?  - 1st Dec 19
Will Labour's Insane Manifesto Spending Plans Bankrupt Britain? - 1st Dec 19
Labour vs Tory Manifesto Debt Fuelled Voter Bribes Impact on UK General Election - 30th Nov 19
Growing Inequality Unrest Threatens Mining Industry - 30th Nov 19
Conspiracy Theories Are Killing This Nation - 30th Nov 19
How to Clip a Budgies / Parakeets Wings, Cut / Trim Bird's Flight Feathers - 30th Nov 19
Hidden Failure of SIFI Banks - 29th Nov 19
Use the “Ferrari Pattern” to Predictably Make 431% with IPOs - 29th Nov 19
Tax-Loss Selling Drives Down Gold and Silver Junior Stock Prices - 29th Nov 19
We Are on the Brink of the Second Great Depression - 29th Nov 19
How to Spot REAL Amazon Black Friday Bargains and Avoid FAKE Sales - 29th Nov 19

Market Oracle FREE Newsletter

UK House prices predicting general election result

Brexit: What Will it Mean for Exchange Rates?

Currencies / Forex Trading Dec 11, 2018 - 07:26 AM GMT

By: Submissions

Currencies There’s a lot of confusion around exactly what’s happening with Brexit, which seems to be more and more complicated. Whatever you think is the best solution, if you’re in business you’re likely to be facing difficulties because of all the uncertainty. How can you make long-term predictions in this situation? How can you organise your overseas business, whether you’re trading with foreign partners or managing distant franchises, when you don’t know what the exchange rates are going to do? In fact, there are some predictions you can work with where that’s concerned. This isn’t the first such uncertainty the international markets have experienced, and models exist that can take it into account. This article explains what the experts think will happen and what we can learn from events so far.




Different forms of Brexit

At this stage there are several directions that Brexit could take, each with its own probably consequences for the exchange rates:

  • A fixed deal for a full exit – business likes certainty, so this kind of deal would have the advantage of letting everybody know where they stand. As many people have been waiting for a bit of certainty so they can undertake delayed transactions, this would be likely to result in a short-term rise in the value of the pound, but most experts think it would start to fall again thereafter.
  • A Norway-style option – this kind of solution would also provide some stability and clarity, so the pound would be likely to rise in the short term. In the longer term experts think it would fall but its movement would be more closely related to that of the euro than in other scenarios, which should reduce uncertainty in that exchange.
  • A deal allowing for further negotiation – this type of deal would help the markets to stabilise in the immediate term, potentially buoying the pound a little but not as much as in the scenarios above. In the longer term, because it would prolong uncertainty, it could be expected to keep the pound low.
  • No deal – this would be by far the worst option where the pound is concerned; experts think it could fall by as much as 22% and that it would remain low for up to ten years.
  • No Brexit – if Brexit is so chaotic, would things settle down if it were simply cancelled? Probably, but not immediately. There would still be a shock to the system with possible social unrest impacting infrastructure, and the pound would probably fall as a result. Its ability to recover would depend on whether or not the government said Article 50 might be activated again in the near future.

Key moments for traders

If you’re hoping to take advantage of currency shifts as a trader, when should you expect key movements to occur? The first would be expected at the point when a firm decision is made, even if that decision is that there will be no Brexit or that negotiations will continue after the end of March. The pound may rally briefly but will probably drop again within 48 hours. Brexit day itself is likely to result in a further significant drop, but because everybody will have anticipated that it will be difficult to secure much advantage from it. More interesting is the point at which positive movement in response to certainty tips into a steeper fall. Traders will have to watch the markets closely to try and spot this ahead of their competitors.

Over the next few months

As Brexit draws closer, it’s important to be aware that changes in the exchange rate won’t wait for it to happen. In fact, it has already had a significant effect on the productivity level and shape of the UK economy. This means that although the key moments described above matter, if you are planning to transfer currency internationally you can’t assume that you have until the end of March to avoid the impact of a low pound. Nevertheless, it’s expected to be early June before the pound begins to fall more steeply.

Over the next few years

Most experts predict that the pound will be depressed by around 6% to 12% for at least the next three years. Within that time, however, there will be the usual short-term fluctuations. Uncertainty around the Trump regime and the weaknesses now being exposed in the US economy could strengthen the pound against the dollar, and it’s almost certain to rally in response to the presidential election in 2020. Elsewhere, China’s ongoing economic instability may help it against the renminbi.

While Brexit may weaken the pound, other economies face other challenges, so there’s no simple map of the future. As always, the key factor to consider is market confidence. As the transition takes hold, this should grow again, allowing the pound to rise.

By Lee

© 2018 Copyright Lee - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules