Brexit, or Britain’s exit from the European Union, has had a significant
and prolonged impact on the forex market. Here’s a look at the various Brexit
developments and how they impacted the British pound, leading to an
unprecedented downward spiral extending for more than three years. Here is how it all happened:
On June 23, 2016, the UK voted in favour of exiting the
EU. Theresa May formed a government in July, following which withdrawal negotiations began. This
sent shockwaves in the markets, resulting in panic selling. The global stock market lost $2
trillion within 24 hours of the results being announced. The British pound tumbled, and the
GBP/USD lost almost 8% to mark the biggest single-day selloff since World War II.
The pound lost 15% versus the euro and 17% against the
Australian dollar. As uncertainties continued, the pound kept sliding over the next six months,
losing almost 20% against the US dollar. On March 29, 2017, when PM May triggered Article 50,
which set the date for Britain’s formal departure from the EU exactly two years later, the pound
plummeted. The GBP/USD reached a low of 1.2441 that day.
The Brexit withdrawal agreement was published on November
14, 2018, followed by the EU member states endorsing the agreement. Prospects of a no-deal
Brexit grabbed the headlines, sending the market in a frenzy. The pound lost around 2% against
the US dollar and the euro.
As the agreed date for Brexit (March 29, 2019)
approached, the pound became highly volatile, although the general direction continued to be
downward. On April 10, the UK and EU27 agreed to extend the Brexit date to October 31, 2019.