According to Ig.com, the definition of Brexit is “a contraction of ‘British exit’, and it is the word used to define the UK’s departure from the EU. The initial referendum took place in June 2016, with 51.9% voting to leave and 48.1% voting to remain. What will occur following the British exit from the EU is to be determined, but what can be assured is that there will be a change to the value of the Pound. Below we will discuss how the value of the British Pound has changed since Brexit, as featured in this follow-up article on IG.
Because there is such an expansive range of activity, we will focus mainly on updates regarding the past two years of 2019 and 2020. Much of 2019 was overtaken by the election of the British Prime Minister. There was a robust campaign during the entirety of November 2019, and during this time, Sterling remained relatively flat in value. The polls were predicting a win for the Conservatives in the December 2019 election, but the Labour party did end up increasing their gains during the campaign’s closing days. This, in turn, caused nervousness throughout the markets. However, on election day, Conservatives dominated the polls, which led to the surge of the British Pound. The Pound then gained 2.07% over the US Dollar and 1.61% against the Euro.
Unfortunately, as the Covid-19 Pandemic began to spread across the globe, currencies started experiencing significant changes. From February to April of 2020, the Pound weakened against the US Dollar and experienced a 4.12% decline in value. Coronavirus wreaked havoc on the markets, and many investors turned to the US Dollar as a safe haven. In addition, the Pound weakened against the Euro during this same time period, further proving that investor confidence in the British Pound was at a record low.
From August to September 2020, the British Pound further weakened against the US Dollar and the Euro. In contrast, both the Euro and the Dollar were strengthening at this time. According to IG, it is possible that investors were experiencing anxiety in preparation for a breakdown during the Brexit negotiations. With the covid19 pandemic warning of a second wave, investors were again pulled more towards the Euro and the Dollar as a safe haven.