The vote for England to leave the European Union was more of a political move than it was an economic one. In fact, this move was so political that Prime Minister David Cameron had announced that he would be stepping down thanks to the fact that he no longer felt like he was the right person to lead his country. However, as political of a move as the Brexit is, traders need to be focused on the economic side of things as this is what moves prices and creates or eliminates your personal wealth.
The immediate impact on the GBP, as you might already know, is that the pound fell dramatically against the other major currencies. The GBP/USD pair, for example, was sitting up over 1.475 before the Brexit, but now stands at 1.322 and change. In the month or so since the Brexit referendum has taken place, the price of this pair has fluctuated up and down, but remains largely unchanged as it stays trapped in its range. It has made trading the pair difficult, but it has stood as a decent binary options trade because of the predictable range that it has stayed within. Other pairs have had even higher levels of predictability, such as the Swiss franc against the pound. The dips have not been quite as pronounced as those of the U.S. dollar, but the movements have not always been in lockstep with the dollar’s, thanks to the fact that the economy of Switzerland is far more dependent upon the EU than the U.S.’s is. It’s created an interesting dynamic, and although most binary options brokers don’t have quite the same competitive rate for the GBP/CHF as they do for the GBP/USD, this has created a great opportunity to create safe and more predictable trades. This type of trade certainly isn’t for all traders, but if you understand the dynamics in how currencies interact, more opportunities like this open up, giving you the chance to make more money as you progress in your ability. Education is key here, and that’s why traders of all sorts should never stop learning and looking for new ideas.
The important thing to remember about what the Brexit has done and is doing is that much of the damage has already been done. The pound sterling and the British indices have all had some big shocks already. There is likely to be much more in the future as the transition gets underway, but for those focused on short term fluctuations, the worst is likely to have already occurred.
At least for now. One of the long term repercussions of the Brexit is that it shakes the foundation of the EU itself, and thus the central currency: the euro. While there may not be any major shaking right now, the EU is far less stable now than it was a year ago thanks to this vote, and the EU had plenty of problems before this. Greece and Italy have both experienced huge debt problems, and there is a lot of internal tension amongst the leaders of the EU as countries like France and Germany carry the weight of other nations upon their shoulders. There are many problems that the EU needs to solve if it is going to be relevant 20 years from now and while that doesn’t have an immediate impact on what trades you should be taking out, it is something to be aware of as you go about looking at a long term strategy for yourself. That’s true of whether you are trading binary options, the stock market, currencies, or anything else that you can think of.