By now, pretty much everyone has heard of and thought about Brexit. The UK is set to formally leave the European Union (EU) in October, and there will certainly be some serious changes to the British economy.
What Is Brexit?
‘Brexit’ refers to the UK’s decision to leave the EU. The ‘British exit’ of the EU was passed by a referendum which saw voters from across the UK come out to vote on their country’s future. The referendum produced exceptionally close results, with a close majority of 51.9% of voters opting to vote their way out of the EU.
The British decision to leave the EU has already brought many economic consequences. Political news always carries political implications, of course. That being said, Brexit is a political and economic tsunami that has and will continue to have far-reaching effects. Sharp fluctuations in the currency exchange rates are just the beginning of the effects to come.
Which Events Made the Pound Fluctuate?
Events that made the pound fluctuate have been illustrated by MoneyTransfers.com in this infographic.
As shown in the infographic sudden changes have caused sudden fluctuations in exchange rates throughout the Brexit process. The British Pound (GBP) and the Euro (EUR) have both been placed at the mercy of political developments in London and Brussels.
When the UK’s future in the EU came into question during the European Union Referendum Act’s Royal Assent in December of 2015, the exchange rates were 1.5 USD per GBP, and 1.38 EUR per GBP. It will likely come as no surprise that this is the strongest value the British Pound has held since the reception of Royal Assent. The value of the Pound has changed significantly since then, with the overall trajectory being downwards.
The Pound’s value has fluctuated sharply on many occasions since Brexit was put on the table. Former Prime Minister David Cameron announced the referendum in February of 2016. The voting took place on the 23rd of June, 2016, and the results caused Cameron and other senior officials to resign the next day. This resignation resulted in the fastest and sharpest drop in value for the Pound since Brexit began.
Cameron’s resignation marks when uncertainty in Britain’s future started kicking in. We can expect that the next few years will see several events shake the exchange rates. On the day that Theresa May became the new British Prime Minister, the Pound was sitting at 1.33 USD per GBP and 1.20 GBP per EUR. For reference, this was just 1 month after Cameron and his colleagues resigned from their posts. From here, the Pound’s story only grew more uncertain.
When Donald Trump was announced President of the US on November 1st of 2016, the exchange rate was 1.26 USD per GBP, and 1.12 EUR per GBP. Trump had promised during the campaign that he would seek to form a new relationship with the UK. Furthermore, Trump had already broken with the mainstream political opinion of Brexit in the US.
The next major event in Brexit was the initial triggering of Article 50 of the Treaty on European Union in March of 2017. This article offers EU members a path to leave the EU. The triggering of Article 50 was a historical moment that would pave the way for years of debate and political instability regarding Britain’s future with the EU.
Just three months later, Theresa May took a gamble by calling for a general election in order to improve her parliamentary majority. The election ended up having the opposite effect, and May was left with even fewer seats than before. At this point, the exchange rates were 1.30 USD per GBP and 1.15 EUR per GBP.
After two years of ongoing political discourse, negotiations, and several votes in parliament, Theresa May was left having to find a “Plan B” for Brexit. The “Plan B” deal was revealed on January 23rd of 2019 when the exchange rates were very close to where they were during May’s general elections. On March 13th, Members of Parliament voted to rule out a “no-deal” Brexit in a non-binding vote.
After all the grueling politics, Theresa May announced she would be stepping down as Prime Minister on May 24th of 2019. She went on to formally resign on June 7th, after a final defeat in Parliament. June 7th saw the Pound valued at 1.27 USD per GBP and 1.12 EUR per GBP.