Brexit, it is the decision by United Kingdom (UK) citizen through a referendum held on June 23, 2016, to quit the European Union (EU). British exit is the full name of ‘Brexit’. Brexit negotiations for the both EU and UK have been of major concern as the deadline for exit come on March 29th, 2019 .Major decision and development form the negotiations which will send a ripple effect across the global financial market. The volatile environment of the negotiation has created uncertainty and instability in political and economic dynamics which influence currency trade.
The uncertainty of exit has brought about new problems and advantages for currency traders. Consequently creating a whole new and unknown chapter for traders.
Effect of Brexit on currency traders
Movement of the currency
Brexit has a significant effect on the flow of money globally .With the Brexit, a trader must understand the world economy regarding the Brexit negotiations. The way an economy behaves, it will predetermine the movement of the currency. Likewise, traders in economies that are not performing very well will mostly end up making losses. This means that forex trades will need to familiarize themselves with the latest information on paired currency and be on the lookout for a different kind of pair of money to minimize losses.
Cost of the trade transaction.
Transaction cost affects forex trading, with the looming exit of the United Kingdom from the European market. The will mean tighter control of goods and service moving across its borders ,for united kingdom have to exit the custom union bloc which control tariffs for EU . This will result in the rise of price of food such as beverage as well as those of non –food items. The economy will be significantly be affected by an increase in the cost of importation. Since Forex trading mostly involve export and import traders, the increase in importation tariffs cause the price to go up .thus transaction cost affects the forex trading
GBP/USD pair could tumble down
Currencies trade will be significantly be affected by high cost of trade transaction .the exit can result in low foreign capital inflow due to increase in the deficit in Britain account .furthermore, this can cause the country to lose its appeal as the financial hub hence affecting the sterling. Besides, it can result in the pound price reducing against the dollar; this proves a difficult time for forex traders.
Boost for traders in Scotland and Northern Ireland
Scotland and Northern Ireland currency trader will benefit the most with Brexit. After the exit of the UK from the EU, Scotland will merge with Northern Ireland. Ireland merger with Scotland will boost the Euro while the pound will take a massive hit. Meaning, trading in pair with euro will result in profit, this profit will felt majorly by Ireland and Scotland currency traders.
Uncertainty in global trade
Given, the current high profile debate with regard to Brexit negotiations it creates uncertainty in global political events. Forex traders are uneasy as unstable countries, and global politics have a significant effect on forex trade .In such situation traders should understand how to trade in such conditions. This force traders to risk, for most of this event that happens in the world stage cause the traders to act dramatically which can result in huge losses
The real effects would rely upon the exchanging relationship that the UK consults with the EU post-Brexit. The vulnerability brought about by the Brexit will keep on affecting the forex showcase all around. Accordingly, as a currency trader, require some serious energy and concentrate every one of these patterns for you to be on the triumphant end, amid this Brexit negotiation state.