What does an EU withdrawal mean for the Pound?

This morning is a historic event for the EU, as much as it is the UK. The first country ever to withdraw from the EU. David Cameron this morning has given his speech to the British public announcing his resignation – rightly or wrongly – stating that the British people need a new leadership to take them through the withdrawal process.

What does this mean for the UK and more importantly, how will this impact the Pound?

The Pound slumped 11% on the outcome of the vote, FTSE fell sharply but both have stabilised in the early hours of trading. GBPEUR rates remain at 1.25, GBPUSD rates fell sharply from 1.50 to 1.32, lows not seen for 3 decades, before regaining ground to 1.39.

The outlook for the Pound looks bearish, David Cameron’s resignation casts further uncertainty over the future of the UK and until we have some clues as to what deal the EU will give the UK, the Pound could continue to fall in the foreseeable.

Those looking to buy pounds are likely to have an extended period of opportunity until it’s understood the wider implications of a Brexit. In the mean-time, existing agreements with the EU will remain frozen until article 50 is triggered. With the announcement of David Cameron’s resignation, this may not be for some time.

That being said, the UK is vulnerable to economic releases, changes in consumer spending and given that inflation is 0.4%, there are concerns by some that the UK may fall into recession.

Mark Carney of the BoE warned of the potential implications of a Brexit, so have a number of economists, business leaders and financial institutes.

As a Pound buyer, a window of opportunity has opened for you.

The Pound’s recovery is contingent on a number of factors. Who will take over as Prime Minister? What deal will the EU provide? Will the UK suffer economically as a result? How will this impact the global economy?

There are such a large number of factors that could impact Sterling and whether you are buying or selling, rates are still attractive either side with GBPEUR rates now at 1.25 and GBPUSD are moving back up to 1.40. The next few weeks and months ahead are shrouded in uncertainty and I would therefore advise you email me at [email protected] if you have any concerns about the Pound weakening further.