How the next steps of Brexit could affect Forex Markets


The forex market is a platform where traders can buy, sell and speculate on various currencies. The market features central banks, commercial banks, retail traders, investors and investment management firms among others. There is no central location for controlling this market. It is run by a network of computers around the world where brokers and retailers consistently bid and sell currencies in a bid to make some profits. The market runs for 24 hours, and is influenced by major factors that run the world including politics and war. If you want to participate in the trading of currencies, you can start by signing up for an account at connectFX brokers.

Brexit or the apparent withdrawal of the United Kingdom (UK) from the European Union (EU) is both a political and an economic issue that will affect the forex market in multiple ways. The EU comprises of 28 countries in Europe. Citizens in each of these countries can live, work and trade in any of these countries.

The UK is the second-largest economy after Germany in the EU. Leaving the union will affect the balance of trade not just for the UK, but also for the Union. Being the second-largest economy in this union will see its exit, reduce the union’s volume of trade and bargaining power in the world market. Limited bargaining power will weaken both the Great Britain Pound (GBP) and the Euro, two of the largest currency pairs in the forex market.

In a vote or referendum carried out on June 23rd, 2016, UK citizens voted in favor of the Brexit, 52% to 48%. There was about 72% voter turnout in the referendum, showing that a majority of this country’s citizens were concerned with the outcome.

The UK has twice delayed the Brexit move hoping to strike a good deal with the EU. The EU and the UK are yet to agree on the rights of the UK and British citizens in the EU nations and the rights of EU citizens in the UK. They also are yet to agree on how much money the UK is going to pay the EU.

The main contention lies on the Irish border. If the UK goes ahead with the Brexit, which seems inevitable, then there will be border checks on the Irish border. There will be no single market as there have been and goods from the UK will have to be checked by the EU custom officials. This process will cause a lot of delays and bottlenecks that will significantly slow down the economy of both jurisdictions, and especially Britain.

A no-deal Brexit is set to negatively affect the British pound and lower the trading volume in the forex market. The GBP is the second most important and valuable currency after the dollar. It is one of the most traded currency pairs against other currencies. No-deal Brexit will thus, negatively impact the entire trading as it will most likely affect the UK’s economy even if the government claims that it has measures in place to cushion against such effects.