The British Pound, The Euro And The Coming Months
Forex Blog Articles
The British Pound and the Euro will be severely impacted by Brexit in the coming months – so we need to talk about it for just a little while.
As many of you that follow The5ers blog know we try to stick to financial issues as religiously as possible – we offer our analysis on a variety of topics, provide you with some success stories from The5ers program and even give you some interesting background on anything from trading tactics to various indices.
But as many of you know – economics does not exist in a vacuum and is often influenced by other conditions such as politics and world events, and these next few months will be one of those times when it comes to the UK, the European Union and everything related to Brexit.
The past week has seen some earthquake-like moves in British politics – Newly minted PM Boris Johnson suffered a major defeat when several members of his own party “defected” to the opposition to block his efforts of pulling off a “hard” (no-deal) Brexit come October 31st.
The situation was complicated further when parliament also blocked Johnson’s attempt to call for a flash election that will take place on October 15th, a mere two weeks before the Brexit deadline at least for the time being.
Johnson’s opposition is attempting to give themselves and the UK as a whole 3 more months to negotiate some sort of a deal with the European Union by pushing the deadline to January.
All of this could have a devastating impact on both the British Pound and the Euro in the coming months as political struggles continue and here’s a little on how this all could impact you as Forex traders.
The British Pound currently sits at a level of 1.11659 per Euro, and has actually been on the rise in recent weeks since hitting 1.07375 on August 10th but it is becoming increasingly difficult to see it remain at these levels as the uncertainty surrounding it continues, with some experts saying that a “no-deal” hard Brexit will bring it to a 1-1 rate vs. the Euro and possibly worse.
There are many reasons for that but we only have room for a few:
A “hard” Brexit will lead to increased border crossing times for an infinite number of products on both ends of the English Channel – anything from medicine to livestock will be faced with increased forms to fill out, shipping costs not to mention border crossing queues are predicted to last as long as 2 days!
It is also becoming increasingly unclear what will be the new standard for travel to/from the UK so tourism and businesses will also be greatly impacted in a negative way.
And we can’t really skip over the importance of proper relations between two such entities to the balance of power in the world economy.
With all of these conditions in a state of flux, it becomes easier to see why most predictions for the future of the British Pound are grim.
In the wake of years of Brexit stories and controversy, the UK has essentially backed itself into a corner – it can either proceed with its scheduled course of action which will have untold impact on its economy for decades to come or it can hope the EU has not exhausted its willingness to discuss more reasonable terms (or a complete U-turn) and risk upsetting those who voted for Brexit, not to mention come off looking like a nation that has no idea what it is doing on a global scale.
Obviously – neither course of action is very desirable which means that both the British Pound and the Euro are predicted to have a stormy few months which can play right into the hands of the shrewd Forex trader.
The following link has a small chart of the EUR/GBP which shows just how August ended for the EUR/GBP pair which could also serve as an indication of the future.
The question now remains – How do you see this Brexit debacle going? Will you be trading this pairing in the coming months or staying away from it?
Let us know!
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