Alex von Stachelkopf
According to Standard & Poor's, if the United Kingdom quits the European Union, this may eventually lead to undesirable consequences for both sides. In particular, they say that the so-called Brexit may well affect the U.K.’s national currency – the British Pound. As you probably know, the British Pound is a major currency, a reserve one, which means it is used (along with the U.S. Dollar and the Euro) by many central banks around the globe to store their currency reserves. It is not a secret that Great Britain in general and London in particular have been major financial centers of the world for centuries.
That said, the Brexit scenario does eventually manifests itself, this is going to undermine the status of the British Pound as a global reserve currency. Moreover, it may lose the status at all, the experts say. On top of that, most international rating agencies including S&P may well cut the U.K.’s AAA credit rating, which is the highest possible one.
Moreover, the experts predict that in case of quitting the EU, Great Britain is definitely going to see a considerable flight of capital, which is something no economy wants. If that’s the case, this is definitely going to affect the well-being of the British people and the entire economy. They say there is a huge current balance deficit. The Bank of England is concerned about this fact. This is another factor confirming the supposition that on quitting the EU, the United Kingdom may see its national currency crash by 10% or more at a time, which would be a real shock to the economy as well as many international financial markets out there, including Forex.
Not so long ago, several British research institutes calculated that the total amount of loss caused by the Brexit scenario may reach as much as $21,5 billion over the next 10 years. They are convinced that the people of Great Britain may initiate a whole decade of financial instability for themselves with their own hands. This is the time required for the local businesses to adapt to a new financial reality and new standards. The only guys who may benefit from this are lawyers, consultants and technology experts since their services are going to be in high demand once the Brexit does happen.
That said, the experts don’t see any reason for the plain folks to vote for the Brexit scenario during the forthcoming referendum scheduled for late June. Not so long ago, the U.K. business circles were interviewed to find out their expectations. According to the results of the survey, the U.K.’s biggest companies are already trying to secure themselves against a likely drop of the British Pound against other major currencies in case of the worst-case scenario. If the people choose to quit the EU, the British Pound may well crash by 10% or more at a time. More and more local businesses are insuring themselves against major risks.
It is also interesting to note that some financiers have already predicted that a Brexit by 2030 is going to cut the U.K. GDP by 6%. Even the British Minister of Finance agrees with this prediction. For those of you who don’t know, the Brexit referendum will is scheduled for June 23rd, 2016. Multiple surveys say that the amount of advocates and adversaries of the Brexit scenario is roughly equal – 50/50.
Masterforex-V Academy experts say that if the United Kingdom quits the European Union, this is going to trigger a prolonged period of uncertainty. First of all, this is going to affect major economic issues, which are very difficult to resolve without external support. Even the Governor of the Bank of England doubts the ability of the British economy to sustain its growth without European partners. That’s why he promotes the idea of staying in the union. To be more specific, the mentioned issues are going to aggravate the situation by cutting the British export, consumer demand and other key factors of economic well-being. That’s why the plain folks should think twice before they choose to vote for quitting the EU.
Alex von Stachelkopf
