What a Brexit could mean for your Pounds

Whichever side you sit on, you will have differing opinions on what will happen to the UK economy following the EU referendum on 23 June.Pound

However, one thing is almost certain if the UK were to make a European exit: The Pound is expected to fall sharply. This would mainly be due to the economic and financial uncertainty that a “leave” vote would cause.

Timeframes for the negotiation of trade agreements with the EU, and the terms of those agreements, would be shrouded in mystery for a long time. The question then that most people are concerned with is: “How long will this take?”

2016: The year of the volatile Pound

Largely on the back of speculation surrounding Brexit, the Pound has already touched on seven year lows against the USD (1.407) this year. The Sterling has since bounced back somewhat, but it remains fragile. If the “leave” campaign were to be successful, most analysts are expecting there to be further losses for the Pound.

Analysts and high street banks are predicting that, within a day of the UK leaving the European Union, the Pound could shed up to 20% of its value against other major currencies. This would mean that the Pound may end up being valued at the same level as the Euro.

The “leave” campaign argues that the Pound may feel some negative affects initially, but it would strengthen again shortly after. The dream is that, freed from the forced contributions to the EU budget, the Pound would be allowed to grow unhindered.

Conversely, the “remain” campaigners argue that foreign companies would move their HQs out of the UK, as there would be a loss to the single EU market advantage. This, they claim, would put the Pound and the UK economy under strain.

The Bank of England is also preparing itself for potential financial instability as it holds exceptional auctions of Sterling to ensure that there are sufficient funds in reserve to deal with any turmoil. This is to safeguard against private investors pulling Pounds out of the UK to avoid a feared depreciation in the currency.

With less than a week to go to the game-changing referendum – and with the “leave” campaign holding a six point lead over the “remain” campaign – the UK economy is on full Brexit alert, with the FTSE and the local currency braced for losses.

Brexit or no Brexit, you can contact our forex brokers if you have any questions about getting your money sent into or out of the UK. Give us a call on +61 3 8651 4500 or send an email to ausmoney@1stcontact.com.

, , , ,