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jobalertshopSince the United Kingdom voted to leave the European Union in June of 2016, Brexit has been one of the most significant political events to impact the country and its currency. The complex negotiations surrounding Brexit are still ongoing, but there have already been several instances of the impact on the GBP exchange rate. In this article, we will explore how the Brexit negotiations have affected the GBP exchange rate and what it could mean for the future.
First, it is important to understand the context of the negotiations. The UK and EU are negotiating various aspects of the separation, such as the future of trade, immigration, and regulations. But the main issue is the βdivorce billβ. The UK agreed to pay a certain amount of money to the EU that is yet to be decided in order to settle financial obligations accrued while being a part of the EU. These negotiations have been ongoing for several years, and as the deadline approaches, the impact on the GBP exchange rate becomes more apparent.
One of the most immediate impacts of Brexit was the shock to the currency markets. On the day after the referendum, the GBP fell as much as 20% to a 30-year low against the US dollar. Since then, the pound has experienced a period of volatility, with significant dips and spikes depending on the latest news from the negotiations.
For example, when reports came out in October 2018 that a Brexit deal was close, the GBP surged against the US dollar, reaching its highest level in six months. But when the details of the deal were released and faced opposition in parliament, the currency sank once again.
The Brexit negotiations also impact the GBP exchange rate through trade relations. A hard Brexit without a deal would mean that the UK would have to trade with the EU on World Trade Organization (WTO) rules, which would result in increased tariffs and barriers to trade. This scenario would be harmful to the UK economy, which would likely result in a weaker GBP exchange rate.
Furthermore, the impact of the negotiations on the negotiations competition in regard to the central bankβs actions could also impact the GBP exchange rate. If the Bank of England adjusts interest rates to try and boost the UK economy in the face of a hard Brexit, it could lead to a stronger GBP against other currencies, as interest rates impact currency values.
Another factor that could impact the GBP exchange rate is immigration. If the UK loses free movement of people, as is currently being proposed, the impact could be felt on the currency markets. Fewer foreign workers could lead to labor shortages and economic downturns, while more favorable immigration policies could lead to economic growth and a stronger GBP.
Conclusion
The Brexit negotiations have been an unpredictable and volatile time for the GBP exchange rate as UK and EU officials continue to come to agreements. The result of the negotiations could have a significant impact on not just the GBP, but also on the wider global economy, making it essential to monitor developments and their impact on the currency market closely. Ultimately, the future of the GBP is uncertain, but it is clear that the negotiations will continue to have a significant impact on the currency’s value for years to come.
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