Foreign exchange markets experienced volatility as exchange rates reacted to the uncertainty in the run-up to the EU referendum, and once it became clear that the UK had voted to leave the EU, the value of the pound dropped significantly.
Sterling fell to a 30-year low against the US dollar and the GBP/EUR exchange rate fell from a previous high of 1.31 to a low of 1.17, but has since stablised at around 1.21. Some experts had predicted that the pound to euro exchange rate could reach parity if the UK voted in favour of Brexit, but the drops seen have not been as severe as some analysts had been expecting.
“While the situation may be chaotic in the short-term, over the course of the Brexit negotiations, the intial panic will subside and financial markets are likely to stabilise,” comments Laura Parsons of TorFX. “Although some analysts have projected that the pound could fall to parity against the euro in the weeks and months ahead, both the Bank of England and European Central Bank have offered assurances that they will step in to stablise the market if the situation warrants it.”