With the focus on the UK, the impact on Sterling and the political unrest. How will this impact the rest of the EU and its members?
There is no question that Sterling has bared the brunt of the historic vote, EURGBP rates are at a 2 ½ year high providing fantastic opportunities for those looking to purchase Sterling with Euros. I do however, hold the view that the Euro strength is insignificant in the context of the bigger picture. The correlation between political unrest and the rise of right wing movements is well documented, and what we are witnessing in France, the Netherlands and Italy should raise red flags for the EU.
Geert Wilders, leader of the Dutch far-right Freedom Party and Frances Marine Le Pen, President of the National Front, have already mentioned potential Referendums if elected. This contagion is spreading to Sweden, Poland, Hungary, Austria and even Germany. The EU should therefore be looking to calm current affairs, but as yet, they appear to be taking the tough stance.
Considering that the UK is the first country ever to leave the EU, the outcome of negotiations will likely shape the views of other nations. If the UK get a better deal, other members will likely rebel. If the UK get a harsh deal, this could scare other members from following suit but may further anger those that want to leave the Bloc labeling it a dictatorship. My view is that it’s unlikely that the UK will receive a deal significantly worse than they currently have. Given that the UK is the third largest net contributor and provides a good portion of its exports to the EU, any deal that takes place must serve the interests of both nations.
The EU was founded on a framework for free trade, what it has evolved into is a politico-economic union which assumes all 28 nations have the same economic, political and sociological needs. In the event other nations call their own Referendums and the cracks begin to widen, the EU may have to adapt a more lenient stance to its family members to avoid collapse.
In any event, the Euro will experience a knock on effect from a Brexit in due course and those enjoying the highs of the Euro VS Sterling should make the best of current levels, there could be choppy waters ahead.
In the event you have a currency transfer to make, it may be worth making the most of current exchange levels as the potential for further weakness is plausible. Call our trading floor today on 01494 725 353.
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