Aswe already know, the UK has definitely decided to leave the EU. Our study isabout understanding and predicting the impact of that decision on UK’s exchangerate in the short and long run. Below are different writings and proposedliterature related to our topic that we will try to describe and evaluate basedon our objectives and hypothesis of study.· InternationalJournal of Financial ResearchDiscussing the terms of exitis still in a primary state with many unknown results and consequences.
Directly,after the referendum, the value of the British pound fell against the euro anddollar and has kept on decreasing compared to the period before the brexitreferendum. But the UK has definitely decided to take the step of leaving theEU even though the future terms to which it will be subject are still notknown. Globally speaking, Brexit has involved worldwide attention, gettingsupport from some countries and becoming a serious issue from EU citizens, andsome businesses. And many industries, bankers and economists have gave theiropinion concerning the outcome of the Brexit. Even though there are lot ofviews regarding the future of UK, in the best of our knowledge, there is noformal publication or written agreement that can tell us exactly what mayhappen to the UK after the Brexit. There are surely other aspects which effectexchange rates, be it the supply and demand requirements associated to acountry’s balance of trade, the level of political uncertainty as well the overalleconomic performance of a country in relation to others.· Theindependent A British onlinenewspaper Published on 23rd, August 2017.
The pound sterling collapsed to an eight-year low against theeuro, one pound was buying at only €1.0833 the last time the pound reached thatlevel was in 2009 and UK economies is still unstable. The Government hasn’t seemingly made much improvement inEU negotiations about the terms of separation which is leading the UK into aperiod of uncertainty. The same newspaper Publishedon 11th, August 2017,Morgan Stanley, a financialservice firm is expecting one euro to worth more than one sterling for thefirst time. Political uncertainty is increasing and economic growth has beenquite weak which is going to weaker the UK currency even more in the days tocome. · ExpressA British website on cityand business news published on 29th, March 2017.
UK path out of the EU andthe start of Brexit has lead the pound to fall againstother currencies like the euro, Australian or dollar US dollar.As it was expected, theBritish pound fell against the euro when Theresa May activated the Article 50, but GBP exchange rates soon recovered.The GBP/EUR exchange ratehas been fluctuating between €1.143 and €1.159, GBP/USD has recovered from lowsof $1.237 to trade at $1.
242 and GBP/AUD has been holding steady at AU$1.622.What are we expectingfrom the UK currency? It depends mainly of UKnegotiation about the terms of the Brexit. If it goes well then British poundmight gain strength otherwise, the UK currency may be in serious troubles.· TheTelegraphA national British dailybroadsheet newspaper publishedon 22nd, September 2017Leavingthe UE in not without cost. Theresa May said that the UK will respect itsfinancial obligations to the EU and is looking for a period of transition whichwill be of 2 years.Sterling dropped as Theresa Mayspoke and rise back finally it began its fall again, finishing the day 0.7%down against the euro and 0.
4% lower against the dollar. · PoundSterling Live BritishPound to Euro Spot Exchange Rates for 2016 and 2017 from the Bank ofEngland. Below are tables that show theexchange rate’s course. We could not draw tables for all the months fromJanuary to December.
We have selected some specific months so that we canobserve what is happening.