British Pound Gains Some Ground

The Brexit referendum of June 23, 2016 not only left the United Kingdom divided and the future of Europe uncertain, it also had a profound result on both the standard of living in the UK and international trade.

After the referendum, the British Pound decreased to both the U.S. dollar and the euro. The GBP-USD exchange rate reached the lowest point at January 16, 2017, at 1.20 pound to a dollar: a decrease of nearly 20 percent since the vote to leave the European Union. By last week however, the pound had regained much its lost ground. The exchange rate was now only 5.6 percent lower than it was right after the Brexit referendum.

In comparison, the recovery of the pound to the euro seems to be slower. When this exchange rate reached its lowest value on August 29, 2017, it had fallen by 17.8 percent since the Brexit referendum. By January 2018 recovery was visible here as well, but at 1.14 it was still well below the rate of June 2016.

Due to the lower exchange rates, inflation in the UK has increased. This in its turn influences the trade of the country. The UK imports more goods than it exports, with nearly half of those imports coming from European countries. As a result, importing goods, such as food, has become more expensive.