Brexit and the British Pound Journey

Brexit and the British Pound Journey

June 2016 and that vote, see’s the British Pound fall off a cliff, well not a large cliff exactly , but it was a significant drop in the value of the Pound.

From the news, it all sounds like doom and gloom, companies who import from abroad or mainly from Euro nations and the US are seeing their import costs going up, which results in a squeeze in their purchasing power and potentially effecting other business costs.

From many in the public view, a lot of people see the value of the pound effecting their holidays, potentially the cost of a trip to Europe may now be dearer than compared to top the previous years, a big difference  being seen in the cost of all the important travel money for those holiday spends. The price rise of a glass of Sangria in Spain can leave a bitter taste in the mouth, then followed by a quick remark ‘The Pound doesn’t go as far as it used too’…

British Pound

But let’s look at the other side of the coin (or the Pound if you pardon the pun).

Firstly a lot of the companies listed on the FTSE 100 make a large proportion of their profits overseas, so when the Pound falls in value against other currencies the great profits when the sales are made in one currency and converted back, such as converting the US Dollar into British Pound, this means the companies list greater profits, which in turn boosts investor confidence and they invest in the particular company hence the share price goes up and up.

Well what’s that got to do with the average man or woman on the street I hear you ask, well be sides from perhaps buying or holding some of those share in the particular company you may also have pension contributions made to a fund which invests that pension contribution into one of the FTSE 100 companies, buy buying those shares, so the higher those shares go, the more those share are going to be worth meaning a greater profit potential when they’re sold.

Also when the company is making more money, in theory this should allow the company to invest more in a number of things such as the workforce pay and conditions or research and development, boosting productivity with better machinery and or computers; investing in its future.

Another thing to remember is a weakened pound also makes Britain a favourite for tourist visits from overseas as their currency has greater buying power, so more tourists give our tourism sector a boost; enabling more small industries such as gift shops, fish & chip shops, B&Bs and even Pubs and many, many more who support the tourism trade to make successful trade and to hiring more people, boosting their local economy with jobs and further investment. British

So there are many things to consider with the direction of the British Pound after the vote of last year, there are positives and negatives on both sides of the argument, it all depends on which side of the argument you’re on,  some people can argue this has all been terrible look at the value of the pound, it’s eroding our purchasing power and now it’s costing us more to go on holiday abroad or others may argue, this is great, business has picked and the drop in the pound has given our industry a much needed boost.

If you’re going to trade British Pound, well hold on because you may be in for perhaps a few bumps along the way while Brexit is sorted out.

*Please Note, Forex and other forms of trading carry a high level of risk to your capital as you could lose all of your investment. These products may not be suitable for every investor, therefore ensure you understand the risks and seek independent advice. Invest only what you can afford to lose. We are NOT financial advisers and we do NOT offer financial advice. 


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