Post-Brexit Currency Exchange Rate
The global economy has been eagerly awaiting the outcome of Brexit since the United Kingdom’s decision to leave the European Union in 2016 – and with the outcome now being known, currency markets have been thrown into turmoil.
The British pound has plummeted in value, while the euro and US dollar have both seen significant boosts in value. This has meant that the shape of post-Brexit currency exchange rates has rapidly changed.
The impact of Brexit on the currency markets has been dramatic. The British pound (GBP) has seen a dramatic devaluation since the 2016 vote with GBP/EUR (the value of one British pound compared with the euro) falling from 1.3128 to 1.1857 in 2020. This drop has resulted in the British pound being worth 15.4 per cent less against the euro than it was in 2016, a sharp change from the standing before the Brexit vote.
A similar effect has been seen across other currency pairs involving the British pound. GBP/USD (the value of one British pound compared with the US dollar) has dropped from 1.4544 to 1.3141. This drop is a decrease of 9.41 per cent since the Brexit vote. GBP/JPY (the value of one British pound compared with the Japanese yen) has dropped from 143.86 to 131.99, representing a decrease of 8.25 per cent.
However, the impact of Brexit has not been exclusive to the GBP. Other currency markets have responded to the UK’s exit from the EU, with the euro (EUR) rising significantly in value. The EUR/USD has risen from 1.1076 to 1.1414, representing an increase of 3.14 per cent since 2016. Similarly, the EUR/JPY has risen from 113.92 to 118.15, increasing 3.78 per cent over the same period.
These movements demonstrate that the impact of Brexit has spread across the world’s economy, affecting very different nation’s currencies in different ways.
The post-Brexit currency exchange rate has been highly volatile in the weeks following the Brexit vote. As the UK continues its Brexit transition and the full scope of the impact of Brexit becomes more apparent, exchange rates will continue to fluctuate. For any decisions regarding currency exchange and international trade, it is essential that businesses stay aware of the current exchange rates at all times.
Though the initial impact of Brexit was mostly focused on the UK’s economy, the reverberations are being felt across the world. A drop in the value of the British pound has raised the costs of importing goods from the UK for those trading in other currencies. It has also caused a significant drop in the value of the GBP for those who are exporting goods from the UK, meaning that they receive less in other currencies compared to before the Brexit vote.
The post-Brexit currency exchange rate is a complex issue. As the UK continues to transition its relationship with the EU, the effects of Brexit will continue to be felt in the currency markets. Businesses need to be aware of the implications of these changes and consider their currency exchange costs when making decisions. By staying informed, they will be able to minimise their financial losses while ensuring they remain ahead of the game.
