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Trade Post-Brexit Volatility
Take advantage of market volatility still being caused by Brexit. Find out how to trade major news events with the No.1 Global MT4 Forex Broker.
Why should you trade Brexit with Eightcap?
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What is Brexit and What is Happening Next?
The term Brexit came about from a public national referendum proposed by David Cameron, a former UK Prime Minister from the Conservative party in 2013. The choice was up to UK voters, to either leave or remain in the EU.
53% of voters opted to withdraw from the EU, setting the wheels of Brexit in motion.
The formal departure from the EU began in January 2020, the UK went through a transition period while negotiators settled the terms and conditions of what post-Brexit UK would look like.
The UK faced immense pressure towards the end of 2020 to reach a deal, if not an imposed tariff increase would have made it extremely difficult for the UK to export goods into Europe. As a result, both sides compromised on major issues such as fishing. Prior to this, the EU was blamed for employment rates in fishing in the UK falling, due to sharing fisheries with the UK. Britain wanted an 80% reduction in shares of fish that the EU would be able to catch in British waters. Concessions were in fact made and the UK managed to cut EU fishing rights by 25%.
Brexit’s Economic Impact
As a result of the new deal in place, could this have a significant impact on the UK economy? There are a number of complications still present which affect most industries. A wave of uncertainty has swept over the new deal sceptics as they fear long term economic impacts.
The deal in place ensures that goods will still be able to travel between the UK and the EU without any tariffs or quotas in 2021. However, more restrictions and regulations have been made that affects both parties involved. Will this cause increased volatility in the markets as a result?
During early December, the markets prepared for the possibility of a no-deal Brexit, predictions came in around the GBP becoming a lot cheaper and that was indeed the instant reaction on the Forex markets. Whereas if there was a deal in place then predictions were around the GBP being pushed higher, as demand was already being built from below 1.3344 in early December 2020. Slowly but surely, the resurfacing of the GBP could be seen throughout the months of December and January. At the end of the first month for 2021, the trendline was checking in around 1.37 and climbing.
Brexit: Advantages and Disadvantages
Advantages
- The deal builds a strong trade tie between both the EU and the UK moving forward, making trading and economic activity relatively easy.
- With the new deal in place, UK companies can still buy and sell goods to Europe without having to pay taxes, there are also no restrictions on the amounts of goods that could be traded.
- The UK will be able to determine its own trade policy and will have the freedom to negotiate deals with other countries out of the Eurozone. Currently, talks have been held between Britain and Australia, the US and New Zealand. How will risk currencies be impacted as a result of new trade agreements?
Disadvantages
- Trade between Britain and the EU could have defaulted to the rules of the World Trade Organisation. This is seen to be more disadvantageous than the existing relationship between both parties.
- Freedom to work and live between the UK and EU will change due to the new deal. If UK nationals want to stay in EU countries for more than 90 days then they will need a visa.
