Sentinel 1973 - On the Impact of Brexit on Currency Trading
AUCKLAND, NEW ZEALAND / ACCESSWIRE / December 6, 2017 / After the results of the Brexit referendum became clear on June 23, 2016, GBP has been on a steady decline for the past year. The initial sharp drop, which neared the currency’s record lows in 1985, was followed by several slumps, leaving the Pound at -15% to EUR and -17% to USD and AUD immediately after the vote. As the volatility of forex markets increases, spreading uncertainty over Europe’s major currencies, Sentinel 1973, a leading broker market of CFDs, discusses the aftermath of Brexit.
The biggest blow to GBP, flash crash - an extremely rapid decline caused by automated trading, which triggered when certain, pre-set parameters were met, happened on October 20, 2016 during the Asian trading session. This, combined with unexpected political events, most notably, leading Brexit supporter Boris Johnson’s sudden announcement not to run for Prime Minister, left the sterling as the worst performing currency during the first half of 2016. The uncertainty over the pound is furthered by the prospect of a complicated departure from the EU, after being tightly entwined with the Single Market for the past 40 years, which, in turn, poses potential hurdles to the Euro. UK makes about 1/6th of EU’s economy, and losing it threatens the political and economic stability of the region, which is already suffering from internal conflicts and banking issues. Taken together, these events spread a great deal of uncertainty over the Euro, and may lead to a significant decline of the currency in the coming months.
The uncertainty and increased volatility surrounding GBP and Euro, paired with the hawkish policy of the US Federal Reserve has pushed investors towards the security of USD, causing a nearly 10% increase in USD/GBP over 4 months. However, as noted by Sentinel 1973, the Dollar faces alternate issues on the other side of the Atlantic. The recently proposed economic policies of US President Donald Trump have made it clear that he favors an export oriented economy, which can cause USD to decline slightly in the coming months. In addition, the most recent round of Brexit negotiations ended without progress, making GBP increasingly harder to trade as the deadline nears. In this light, National Australian Bank has outlined events that could cause 5-10% swings in GBP/USD in either direction. "GBP’s roller-coaster is exacerbated by, on the one hand, thoughts of a General Election (the actual reality of one coming we think could see GBP fall 10% on the prospect of a Labour Government). On the other stands any EU offer of a two year Brexit transition deal (to March 2021) which could see a 5% to 7.5% GBP rally on the basis the UK avoids a cliff-edge and sees its trade environment unchanged for the next three and a half years."
Founded in 1998, Sentinel 1973 is a leading broker market of CFDs. With over 44 years of investment trading expertise, the award-winning company offers CFDs on currencies, indexes and commodities, and specializes in the trading of financial products in Over the Counter and organized stock markets. With over 200 financial instruments and 10 platforms, the company serves both retail and institutional clients in 180 countries throughout Europe, Africa, Middle East, Asia and Latin America.
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SOURCE: Sentinel 1973