Brexit, which stands for Britain’s exit from the European Union, has been a topic of much debate and speculation since the referendum was held in June 2016. The decision to leave the EU has had a significant impact on the global financial markets, including the forex market. In this article, we will explore how the Brexit vote has affected the GBP and USD forex, and when is the best time to trade.
The impact of Brexit on GBP
The GBP (British Pound) was hit hard following the Brexit vote in 2016. The uncertainty and lack of clarity surrounding the UK’s future relationship with the EU led to a sharp decline in the value of the GBP against other major currencies, including the USD.
The GBP/USD pair, which is one of the most actively traded currency pairs in the forex market, fell sharply from around 1.50 to 1.20 within a few months of the referendum. This decline was largely due to the uncertainty surrounding the UK’s future relationship with the EU, as well as concerns over the potential impact on the UK economy.
Since then, the GBP has continued to be volatile, with fluctuations in value based on the progress of Brexit negotiations and other economic factors. For example, a no-deal Brexit would likely lead to further declines in the value of the GBP, while a favorable Brexit deal could lead to an increase in the value of the currency.
When to trade GBP
Due to its volatility, trading the GBP can be risky. However, there are certain times when the GBP is more likely to experience significant fluctuations in value, making it a good time to trade.
For example, during major political events or announcements related to Brexit negotiations, the GBP is likely to be highly volatile. Similarly, major economic data releases, such as GDP figures or inflation rates, can also impact the value of the GBP.
Traders should also pay attention to the trading sessions when trading GBP. The London session, which is the largest and most active forex trading session, is the best time to trade GBP due to high liquidity and volatility.
The impact of Brexit on USD
The impact of Brexit on the USD (United States Dollar) has been somewhat limited compared to other major currencies. However, there have been some indirect effects on the USD due to the uncertainty surrounding the global economy and international trade.
The USD is often seen as a safe-haven currency, meaning that investors tend to flock to it during times of uncertainty or market turmoil. As a result, the USD has benefited from the uncertainty surrounding Brexit, as well as other geopolitical events such as the US-China trade war.
However, the impact of Brexit on the USD has been relatively small compared to other factors, such as the Federal Reserve’s monetary policy decisions or the ongoing trade tensions between the US and China.
When to trade USD
The USD is one of the most actively traded currencies in the forex market, with high liquidity and low volatility. However, there are certain times when the USD is more likely to experience significant fluctuations in value.
For example, major economic data releases, such as the non-farm payroll report or GDP figures, can impact the value of the USD. Similarly, statements from the Federal Reserve regarding monetary policy decisions can also impact the value of the currency.
Traders should also pay attention to the trading sessions when trading USD. The New York session, which is the second-largest forex trading session, is the best time to trade USD due to high liquidity and volatility.
Conclusion
Brexit has had a significant impact on the global financial markets, including the forex market. The GBP has been hit hard by the uncertainty and lack of clarity surrounding the UK’s future relationship with the EU, while the impact on the USD has been relatively small.
When trading GBP, traders should pay attention to major political events or announcements related to Brexit negotiations, as well as major economic data releases. When trading USD, traders should pay attention to major economic data releases and statements from the Federal Reserve regarding monetary policy decisions.
Traders should also pay attention to the trading sessions when trading GBP and USD, with the London session being the best time to trade GBP and the New York session being the best time to trade USD due to high liquidity and volatility.
