The Potential Effects of Brexit on Currency Exchange

When the UK opted to leave the European Union on June the 23rd, no one quite know what the results would be. With the future holding so much uncertainty, the potential effects of the Brexit on currency exchange can be quite worrying. Here’s a look at what could happen over the coming months: 

The Value of the Pound

When the results of the referendum were announced the value of the pound plummeted to its lowest in 31 years. This drastic dip was followed by a few days where its value fluctuated slowly growing back to a steady rate where it was earlier in the year. This had a huge effect on businesses who had overseas investors who quickly withdrew their finances. As the currency exchange is still in a state of continuous flux, this is a worry for many. A company like Ebury can help as they allow you to draw down funds as and when you need them to help improve your working capital and fund supplier payments to help support your business.

Expensive Holidays

Undoubtedly, with the value of the pound being so low, it means when going overseas sterling will be worth less. The exchange rate affects the price of everything when it comes to changing money for travelling overseas. This is especially important when it comes to the euro and the dollar, the UK’s most common travel destinations use these currencies, so be prepared to pay a little more than before. If the value of the pound manages to recover completely by the end of the year this shouldn’t be a problem, but that looks unlikely for the moment. Some currencies have benefited from the Brexit however, with the Japanese Yen has increased in value as a result of the Brexit, because it’s a much safer investment option. The dollar also increased as a result.

Weaker Growth

In emerging markets, the Brexit is likely to have a larger impact as its effects ripple across the globe. Places which are about to stabilise their economy will be prevented from doing so due to a global lack of available monetary tools. This is not solely due to Brexit, but a combination of political changes across the globe as a result.

The full effects of the Brexit on currency exchange are still yet to be felt but with so much unknown territory. It’s difficult to predict exactly what the full effects might be.