Brexit, the Bank of England and the New Five Pound Note.

5-pound

This article takes a look back at the historical time in the United Kingdom  when the British people voted to leave the European Union on 24 June 2016. The following chart shows the impact of  the GBPUSD before the Brexit referendum until the September 2016 monetary policy meeting of the Bank of England lead by Mark Carney. The post Brexit outcome three months later was that the British Pound lost 11% of it’s value. Not quite the free fall nightmare scenario that many doomsday predictors expected when they claimed that a Brexit would be the end of the world for Britain and the Pound  as we know it.

Two simple positive economic outcomes immediately apply to British manufacturers :

  • British goods are 11% cheaper than before Brexit.
  • A weaker pound makes British good more attractive to overseas buyers.

gbpusd-20160915

The next chart shows the outcome of the Brexit vote on the FTSE index of 100 shares.

 

ftse-20160915

In contrast to a fall of 11% in GBPUSD , the UK FTSE 100 share index  has risen around 5% since the close of business before the result of the Brexit vote. What does this all mean? The UK economy will continue to rise modestly of it’s own accord, in line will global economic trends. Outcome Neutral to Bullish.

Finally, good news reached the good British public with the announcement of the new five pound note coming into circulation. It’s washable, chewable and harder to fake.

Up till now, if you ever were to receive change from a UK vendor that totalled more than five pounds, chances are you would have received coinage. Especially annoying if you pay your £ 11 Airport parking with a crisp £ 20 note, to receive nine bulky pound coins as change. You see, the old fiver, before the modern one (with it’s own website) was rather elusive, rare and hard to find in circulation.

It seems that post Brexit, the sky hasn’t fallen on Britain, the new fiver is great, and the Bank of England is planning to continue to buy a ton of corporate bonds (whatever it takes) , hopefully with those new fivers!

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