How will Brexit impact the Euro?

Much is being made of the pound’s collapse should the UK leave the EU. But would be the impact on the single currency once the UK decided to abandon ship? 

The euro could suffer greatly from a Brexit as investors become fearful over the future of the EU. It is no secret that more nationalist parties are finding favour across, the National Front in France, UKIP in the UK and anti immigration parties in Germany and the Netherlands too. Eastern Europe has become very introverted following the large scale migration seen in the last 18 months.  Should the UK leave the EU then this will act as a sign to other EU economies (with most using the Euro) that there is another way besides the Brussels way.

The UK is a key leader in the EU and the withdrawal of the UK from this arrangement would undoubtedly raise serious questions over the outlook for the rest of the EU, the principal currency of which is of course the Euro. Part of sterling’s strength is the large amount of confidence in the UK’s financial institutions and government. The transparency in our systems and strength of rule of law plus the independence of the Bank of England means for all the problems, the pound is a haven. Many pension funds, hedge funds and banks use the UK as a safe place to do business. The Euro by contrast is stronger but is held by many Asian investors and could be more susceptible to weakness in the event of major uncertainty.

If you need to buy Euros with pounds the next few weeks and month are going to be very tricky as we begin to understand just how the UK and the EU’s relationship will develop. Even a ‘Remain’ vote will see a turn in the UK’s relations with Europe and this will have consequences for both the pound and the Euro.

For more information on what to expect in the future on Euro exchange rates please speak to me Jonathan Watson by emailing [email protected]