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Theresa Speech To The European And Global Traders?

Published on 8 February 2017 in News - Pages by Raffick Marday

What Is The Effect Of Theresa May’s Speech To The European And Global Traders?

Brexit is not only politically historic but also a painful reminder of the effects political instability has on any country’s economic development. For the more than two years that the Brexit has dragged on, it has pulled down the pound and soiled the respect it once commanded among major world currencies. And the effect of this loss of value has been felt worldwide with the United Kingdom feeling the immediate pinch that spreads further to Ireland and across Europe.

With every significant move around the Brexit question comes an even larger ripple effect. Prime Minister Theresa May’s supposedly final speech on the topic won’t be any different, and its effects are already visible. In the last week and for the second time in less than three months, the pound has dipped to historical records. The $1.198 trade against the dollar that the pound recorded at the beginning of the week is arguably its biggest loss against the dollar in 31 years safe for the October 7th flash crash in which it traded at $1.18.

Effect on global traders

On the one hand, the trodden value of the pound could be seen as an invite for the international community to make investments in the economic giant. With its worth on a downward spiral, the pound fetches less on the currency exchange markets compared to the rest of the leading global currency.

This state is a tilt in favour of England’s importers as they stand to part with lesser amounts of foreign currencies for the quality products from the United Kingdom. Therefore, for any international investor seeking to cash in on this new trend, this may be the best time to send in salaries to your English workers or for expatriates to send in financial aid, help or invest at home.

Effect on exporters

While importers may be celebrating a hay day, the case is entirely different with exporters. The beaten up currency is continually making their international business prospects a nightmare. With every rising day that the pound weakens in the face of foreign currencies, these traders are forced to part with more pounds to acquire commodities abroad.

If the situation doesn’t improve soon, these traders will only have two business choices if they are to ensure continued liquidity of their enterprises. Both of which are equally disastrous to the United Kingdom’s economy and to a part, the European Union. They will either be forced to halt international trade till the pound problems sink in or increase their retail prices to cater for the currency depreciation that’s eating into their profits.

Either of these decisions directly impacts the country’s economy as they first deprive the United Kingdom’s citizenry of their purchasing power while the second triggers an increase in the country’s inflation. Even with the country’s exit from the European Union, the effects of either of these decisions will still be felt across Europe considering the close trade ties Britain has with her neighbours.

Given that there is no turning back with Brexit, all that the European traders can hope for are proper cautionary measures after Theresa May’s final Brexit speech. The fact that Britain’s economy came to a relatively quick stabilisation after the Brexit’s referendum might also shine in some hope that the current situation will soon fade away.

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