Currency and exchange rate continuation from other thread: THE UK SITUATION Coll

Question

Currency and exchange rate continuation from other thread: THE UK SITUATION Collapse

With the likely move toward a Brexit, look at what has happened with the Pound exchange rate and stock markets. (what has happened?) What if you had already been exporting to the UK, what would this do for you? What if you are importing from the UK, what would this do to you. In the context of the course, and for example this aspect which falls under the macro-environment, what can we learn from this type of political process and consequences for businesses that operate internationally?

150 - 200 words.

Explanation / Answer

When British voters exit the European Union then value of pound decreases to its lowest level and stock market also suffers due to this action. Worth of pound decreases and people are less interested in demanding pounds as a foreign currency.

If we had already exported goods to the UK then we suffered loss because amount of payment is determined initially and due to decrease in pound value. UK will give the amount fix on the trade but actual value of that amount is less than before. So, home country looses from this trade.

On the other hand, if we have imported from the UK then we will be better off because we will pay the same amount for the imported goods as decided earlier while price of goods in UK increases due to depreciation of its currency.

Due to Brexit, businesses who imports foreign goods in UK decreases because now country has to pay more pounds to import goods. While those firms who export goods from the UK gains from trade.

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