How does Brexit influence the trading market?
‘Brexit’ in the trading world has become almost a sort of taboo topic. In the month of October alone, there have been 17 significant happenings with regard to the Brexit debate, and the deadline for a set decision is nearly here. What effect will Brexit have on the trading market, should the UK leave the European Union, and how will this influence the future of trading?
Back when Brexit was announced as a possible move forward for the UK, the forex market took a fall with the British pound dropping with 10% at the level of 1.3230 to the dollar (the lowest since 1985), and the Euro dropping with 4% to the level of 1.0945 to the dollar. EUR/JPY also suffered greatly, reaching an all time low for the last 15 years. If these trends are expected to carry through and possibly worsen when Brexit happens, what is foreseen for the future of the trading market?
Both the British pound and the Euro are expected to remain under pressure and investors are likely to tread safer areas as far as finances are concerned. The likelihood that these currencies will experience a greater decline is also not a far-fetched idea, and a recession may be imminent taking into consideration the uncertainty around global markets and little hope for recovery anytime soon should the losses be fatal.
So, how do traders protect themselves in the event of a Brexit fallout and the worst-case scenarios come into play? The best moves may be to not take risks for the moment being – playing it safe and scouting out the market before moving forward with a risky trade is in your best interest. Try not to commit to long term deals as yet. The future may seem bleak, but a contingency plan like monitoring the market may help you spot trends and avoid the worst of the negative effects on the market by taking calculated steps.