Why do politics impact your exchange rate?

If you’re looking to make a currency transfer, you may be wondering why Brexit has so much influence on the Pound, or why trade tensions between the US and other nations have impacted markets in recent months. Our currency partner, Global Reach, discusses the reasons why currencies fluctuate on political events, and how you can make the most of your currency transfers.

The impact of Brexit

Brexit is a prime example of how politics can move an exchange rate. When the 2016 referendum result became apparent, the Pound fell by 20% because not only was the outcome a surprise, it also set the UK on the road to an unknown economic future.

Markets don’t like uncertainty, and the UK leaving the EU created many questions. As a result, businesses considered whether they needed to move their UK operations to another country within the EU and wanted the government to provide clear plans for Britain’s future outside of the Union to help them plan. That hasn’t happened, and Brexit day has been delayed with no deal in place. The clock is ticking down once again, and the Pound is left in limbo. No progress is being made with the EU, and instead, the Conservative Party are fighting over who will lead following Theresa May’s departure. The front-runners appear to be pro-Brexit, which means they may attempt to pull the UK out of the EU without a deal, which could be detrimental for the Pound.

Geopolitical tensions

Since Trump’s been at the helm across the pond, he hasn’t wasted any time in making waves with other nations. His ongoing trade disputes with China, Mexico, and the European Union all threaten tariffs, and the President usually seems unwilling to budge. In events where markets are concerned that economic growth, could be hampered by trade tensions, currencies react. When risk sentiment is low, safe-haven assets such as the Swiss Franc, Japanese Yen, and sometimes US Dollar often rise, as they’re expected to hold their value.

Elections

Elections are another cause for domestic concern. A new government could make changes and impact the economy. Around the time of a general election, a currency can notice more fluctuations than usual.

How can you make the most of your currency transfer?

Speaking to a foreign exchange expert like Global Reach allows you to discuss your currency requirements with an industry specialist. You’ll have access to one of the most experienced Dealing teams in the industry and be offered market guidance to help you make your transfers at good times for you. You can discuss locking in an exchange rate for up to two years for a property purchase, sign up for the latest currency news and rate alerts, or move money online with the Global Reach award-winning platform. Global Reach is also a winner of Feefo’s Gold Trusted Service Award and won the 2018 Best Currency Service Provider at the Shares Awards.

Suggested social media status: If you’re looking to move money abroad, you might be wondering why exchange rates react to political developments. Read our new blog to find out what could impact your currency transfer.

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