Brexit Causes the British Pound to Falter

In June 2016, the UK narrowly voted to leave the European Union.  The aftermath of the vote is still coming, even three years later.  The European pound dipped to one of its lowest valuation since the vote.  The cause?  New Prime Minister Boris Johnson is preparing for Britain to leave the European Union without a deal. 

The valuation of the European pound has fluctuated over the years, mostly based on how Brexit plays out.  When the British nation voted to leave the European Union, the pound took a dive against the US dollar.  Seen as a symbol of Britain’s stability, we are seeing the instability and uncertainty the vote has led the nation. 

Since the vote, former Prime Minister Theresa May had unsuccessfully garnered deals with the EU.  How does Britain’s leave of the European Union affect their currency?  The United Kingdom has a fairly large national debt, to the tune of over one trillion pounds.  Leaving the EU could cause a recession, which analysts are predicting.  Without a “breakup” deal with the European Union, the United Kingdom could face a hit on public finances, on top of its debt. 

Rather than face the unknown of Brexit, or Britain’s exit, traders are selling causing the valuation to plummet to $1.245 against the US dollar.  The devaluation of the pound could adversely affect the Euro as well.  However, there are still many unknowns – especially with the new Prime Minister Johnson who was just elected in June. 

While many believe PM Johnson could very well lead Britain to leave the European Union without a deal, he has until October to strike a deal.  Both the United Kingdom and the European Union are not prepared for a “no deal Brexit”, causing many analysts and the rest of the European Union to hold their breath for what’s to come.