How Will Brexit Affect the British Pound?

When the British public voted for Brexit, the Great British Pound (GBP) plummeted to a huge low and shocked the world’s financial markets. Shortly after the Brexit vote, GBP fell to a 30-year low and sank to its lowest point since 1985. This fall triggered a huge rush of capital from GBP and into the Swiss franc.

Alongside these huge moves of GBP capital into foreign currencies, the impact of Brexit also caused the Pound to drop sharply against both the U.S. Dollar and the Euro. At its lowest point, GBP fell to $1.3228 which was its lowest value against the dollar since major economies agreed to purposely weaken it in September 1985.

#1: Shares Will Fall

When the vote happened, lots of key shares fell. One of these drops included the shares of budget airline Easyjet, who saw their shares fall by nearly 25% after a profits warning. IAG, the owner of British Airways, also saw their share value fall by one fifth. On the day of the referendum, IAG issued a profit warning, too.

As Brexit will cause economic uncertainty and scepticism amongst consumers, it is likely that airline shares and shares in companies with a large European focus will fall sharply. Why? Because consumers will be dissuaded from holidaying in Europe and further afield because it will be more expensive, and they are likely to stop buying goods from companies in Europe due to higher costs and taxes.

This is something to keep in mind if you regularly trade on the stock markets.  While it’s impossible to predict exactly what will happen, there’s sure to be a period of volatility until the impact of Brexit is truly understood.  If you’re not confident in your knowledge, check out sites like InvestinGoal and see what the professional traders are doing.  On their homepage (which you can find here: https://investingoal.com/) you’ll see that they have a link to the best traders to copy which tells you how to follow them and how to copy them. Emulating their trades may prove to be a good option during this time.

#2: House Prices Will Rise

Not long after results were announced, Foxtons in London issued a profit warning and the UK’s largest builder of housing saw its value fall by 40%.

Brexit means that access to housing and mortgages will be a lot harder in the UK due to higher interest rates and inflation. This will not only stop residents of the UK from buying houses, but foreign investors have been and will continue to be put off investing in the UK housing market, especially in the run up to and immediately after Brexit occurs.

#3: The Pound Will Be Worth Less… A Lot Less

All the uncertainty which surrounds the UK, Brexit and our currency, means that the Pound will be worth a lot less than it has ever been before. The GBP is already at pretty dire levels against the likes of the Euro and U.S. Dollar, especially compared to how strong it has been historically, and it is unlikely to improve and will probably get worse after Brexit.

This means that holidays into Europe, the U.S. and other countries with major economies will cost us more. Whilst £1 would get is $2 once upon a time, it now only gets us around $1.30.

With Brexit looming, people are starting to wonder what’s going to happen to GBP when it happens, and how this will impact key markets such as housing and investing.