In the aftermath of the UK’s historic referendum on independence from the EU, major impacts were felt across the financial markets.
Since the historic vote, the value of the British Pound opposed to the U.S. Dollar has dropped to $1.30, its lowest rate since 1985. Meanwhile, in continental Europe, share prices of Deutsche Bank and Banca Monte dei Paschi di Siena slumped, the latter by 80%. Global stock markets saw many UK assets plummeting, and yields on German and other government bonds fell below zero, as investors rushed to trade their bank shares for sovereign debt.
What becomes of the status of the City of London, currently the banking capital of Europe, remains to be seen, with Frankfurt, Paris, and Dublin all vying to assume the mantle. An increasing number of online traders are now turning to foreign exchange brokers, in order to capitalize on this uncertainty and the market volatility it creates, trading key currency pairs such as the GBP/USD and GBP/EUR.
The EU: a Love-Hate Relationship
The European Union remains critically important to the British economy. Almost half of all British exports are to European countries, representing 13% of overall UK GDP and providing work for an estimated 2.3 million people. When the United Kingdom leaves the EU, it is expected it will arrange a final trade agreement with the bloc within two years, to avoid heavy EU import tariffs.
The tariffs are currently low, creating numerous opportunities for online traders to make money by speculating on the value of the British Pound, as well as key industrial stocks. However, some analysts believe that full sovereignty for the UK will benefit the country’s manufacturing sector and its global exports, since EU regulations which govern working practices are widely seen as damaging to entrepreneurship and the overall economy.
A full or ‘hard’ Brexit, would see the UK severing all formal ties with the EU. This could run the risk of making foreign companies less likely to invest in Britain.
Over the past decade, one-fifth of all investments in UK companies were made by foreign entities. By region, EU companies represent the second-largest group of inward investors in the UK economy, while Britain has traditionally been a gateway to the EU for companies registered in the U.S., Asia and beyond.
Once again, the tense political situation in the UK and across Europe can present significant openings for traders using foreign exchange brokers and online platforms to buy and sell British Pound based currency pairs.
Trading GBP Online
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