The Initial Brexit Effects on the Pound’s Trading Relationships

The Brexit announcement came as a surprise to many, and even though a lot of traders had hedged their investments before the referendum, the currency markets still saw a lot of action in the immediate aftermath. Plenty of uncertainty still remains, especially around the pound’s value, offering many future trading opportunities through Oanda. However, it was in those first few days that the Brexit result had a huge impact on the pound’s value and trading relationships.


Pound Sterling (GBP) exchange rates saw a general weakening against most currencies it is partnered with. As the euro is one of its major partners and used close to home, the initial impact was understandably that the euro strengthened as the pound dropped to its lowest value in 30 years. The euro remains bullish against the pound, with the Bank of England expected to cut interest rates in an attempt to strengthen yet the Eurozone’s inflation has provided a good boost for the euro.


The USA is another of Great Britain’s premier trading partners and the USD/GBP is one of the major currencies traded across the world. Immediately the US dollar strengthened in light of a Brexit victory, with many traders and investors viewing it as a safe choice for once. Since then the pound has stabilised a little, with the announcement of a new Prime Minister, which has helped it to edge a tiny bit higher against the dollar, but is still nowhere near pre-Brexit levels.


While not one of the major currency pairs, the Japanese yen and Pound Sterling are two of the most traded in the world. As a traditional go-to choice for traders and investors during times of uncertainty, it was of little surprise to see the yen make huge gains before and after the UK’s EU membership referendum. The yen has also since improved against the US dollar, even though it too holds a level of uncertainty.


The euro and US dollar both strengthened against the Pound Sterling after the Brexit vote, and current forecasts are for a move lower. The remaining uncertainty in the markets with potential effects of the UK actually leaving the EU could see them both benefit further as well. The relationship between the two has stayed fairly stable, with the US dollar having a slight edge for the most part. Either way, uncertainty in the currency markets appears to be the new normal, offering ample opportunities for traders.

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