Best of the Week
Most Popular
1. US Housing Market House Prices Bull Market Trend Current State - Nadeem_Walayat
2.Gold and Silver End of Week Technical, CoT and Fundamental Status - Gary_Tanashian
3.Stock Market Dow Trend Forecast - April Update - Nadeem_Walayat
4.When Will the Stock Market’s Rally Stop? - Troy_Bombardia
5.Russia and China Intend to Drain the West of Its Gold - MoneyMetals
6.BAIDU (BIDU) - Top 10 Artificial Intelligence Stocks Investing To Profit from AI Mega-trend - Nadeem_Walayat
7.Stop Feeding the Chinese Empire - ‘Belt and Road’ Trojan Horse - Richard_Mills
8.Stock Market US China Trade War Panic! Trend Forecast May 2019 Update - Nadeem_Walayat
9.US China Trade Impasse Threatens US Lithium, Rare Earth Imports - Richard_Mills
10.How to Invest in AI Stocks to Profit from the Machine Intelligence Mega-trend - Nadeem_Walayat
Last 7 days
S&P 500 Stuck at 2,900, Still No Clear Direction - 17th June 19
Is Boris set to be the next Conservation leader? - 17th June 19
Clock’s Ticking on Your Chance to Profit from the Yield Curve Inversion - 17th June 19
Stock Market Rally Faltering? - 17th June 19
Johnson Vs Gove Tory Leadership Contest Grudge Match Betfair Betting - 17th June 19
Nasdaq Stock Index Prediction System Is Telling Us A Very Different Story - 17th June 19
King Dollar Rides Higher Creating Pressures On Foreign Economies - 17th June 19
Land Rover Discovery Sport Tailgate Not Working Problems Fix (70) - 17th June 19
Stock Market Outlook: is the S&P today just like 2007 or 2016? - 17th June 19
US China War - Thucydides Trap and gold - 16th June 19
Gold Stocks Bull Upleg Mounting - 16th June 19
Gold Price Seasonal Trend Analysis - Video - 16th June 19
Fethiye Market Fruit, Veg, Spices and Turkish Delight Tourist Shopping - 16th June 19
US Dollar Gold Trend Analysis - 15th June 19
Gold Stocks “Launch” is in Line With Fundamentals - 15th June 19
The Rise of Silver and Major Economic Decline - 15th June 19
Fire Insurance Claims: What Are the Things a Fire Claim Adjuster Does? - 15th June 19
How To Find A Trustworthy Casino? - 15th June 19
Boris Johnson Vs Michael Gove Tory Leadership Grudge Match - Video - 14th June 19
Gold and Silver, Precious Metals: T-Minus 3 Seconds To Liftoff! - 14th June 19
Silver Investing Trend Analysis - Video - 14th June 19
The American Dream Is Alive and Well - in China - 14th June 19
Keeping the Online Gaming Industry in Line - 14th June 19
How Acquisitions Affect Global Stocks - 14th June 19
Please Don’t Buy the Dip in Nvidia or Other Chip Stocks - 14th June 19
A Big Thing in Investor Education is Explainer Videos - 14th June 19
IRAN - The Next American War - 13th June 19
Boris Johnson Vs Michael Gove Tory Leadership Grudge Match Contest - 13th June 19
Top Best VPN Services You Can Choose For Your iPhone - 13th June 19
Tory Leadership Contest Betting Markets Forecast - Betfair - 13th June 19
US Stock Market Setting Up A Pennant Formation - 13th June 19
Which Stocks Will Lead The Cannabis Rebound? - 13th June 19
The Privatization of US Indo-Pacific Vision - Project 2049, Armitage, Budget Ploys and Taiwan Nexus - 12th June 19
Gold Price Breaks to the Upside - 12th June 19
Top Publicly Traded Casino Company Stocks for 2019 - 12th June 19
Silver Investing Trend Analysis - 12th June 19
Why Blue-Chip Dividend Stocks Aren’t as Safe as You Think - 12th June 19
Technical Analysis Shows Aug/Sept Stock Market Top Pattern Should Form - 12th June 19
FTSE 100: A Top European Index - 12th June 19
Gold Surprise! - 11th June 19
How Forex Indicators are Getting Even More Attention in the Market? - 11th June 19
Stock Market Storm Clouds on the Horizon - 11th June 19
Is Your Financial Security Based On A Double Aberration? - 11th June 19
What If Stocks Are Wrong About Interest Rate Cuts? - 11th June 19
US House Prices Yield Curve, Debt, QE4EVER! - 11th June 19
Natural Gas Moves Into Basing Zone - 11th June 19
U.S. Dollar Stall is Good for Commodities - 11th June 19
Fed Running Out of Time and Conventional Weapons - 11th June 19
Trade Wars Propelling Stock Markets to New Highs - 11th June 19
Best Travel Bags for Summer Holidays 2019, Back Sling packs, water proof, money belt, tactical - 11th June 19
Betting on Next British Prime Minister Tory Leadership Betfair Markets Forecast - 10th June 19
How Can Stock Market Go Up When We’re Headed Towards a Recession? - 10th June 19
If You Invest in Dividend Stocks, Do This to Double Your Returns - 10th June 19
Reasons for the Success of the Dating Market - 10th June 19
Gold Price Trend Analysis - Video - 10th June 19
US Stock Markets Rally Hard – Could Another Big Upside Leg Begin? - 10th June 19
Stock Market Huge Cosmic Cluster Ahead: Buckle Up! - 10th June 19
Stock Market Higher To Go? - 10th June 19
The Gold Price Golden Neckline… - 10th June 19
Gold Price Seasonal Trend Analysis - 9th June 19
The Fed Stops Pretending - 9th June 19
Fed Rate Cuts Soon; Bitcoin Enthusiasts Join Wall Street in Bashing Gold - 9th June 19
1990s vs. 2010s - Which Expansion Will be Better for Gold? - 9th June 19
Gold Price Trend Analysis, MACD, Trend Channels, Support / Resistance - 8th June 19
Gold Surges Near Breakout - 8th June 19
Could Gold Rally Above $3750 Before December 2019? - 8th June 19
5 Big Lies About Precious Metals Investing Exposed - 8th June 19

Market Oracle FREE Newsletter

Gold Price Trend Forecast Summer 2019

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