Brexit Break-down Pt.2

This article will explain everything that has happened in Brexit since the previous article was written. We will also cover the historical timeline of Brexit as well as some currency predictions

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The road to Brexit was a long, confusing, and exhausting journey with so many twists and turns that most people, traders especially, lost track of what was happening. In the previous Brexit article we discussed the necessary steps that Great Britain could take in order to reach an orderly Brexit. In this article we'll be covering a brief timeline of the events of Brexit as well as the effect on the Euro and the GBP. We'll also include a summary of how Corona Virus may affect the GBP since their economy is a major exporter to the European Union countries.

Timeline

First, lets recap the confusing series of events that led to Boris Johnson finally following through on his promise.

1) In a referendum held on June 23, 2016, the majority of those who voted chose to leave the European Union.

2) On March 29, 2017, in writing to European Council President Donald Tusk, the Prime Minister formally triggered Article 50 and began the two-year countdown to the UK formally leaving the EU under "Brexit".

3) Following a House of Commons vote on March 14, 2019, the Government sought permission from the EU to extend Article 50 and agree on a later Brexit date.

4) At a meeting of the European Council on 10 April 2019, the UK and EU27 agreed to extend Article 50 until 31 October 2019.

5) On October 19, 2019, May's new Brexit deal was lost on amendment in the Commons.

6) On December 12, 2019, Boris Johnson won a majority in the UK General Election and reaffirmed his commitment to ‘get Brexit done‘ by 31 January 2020.

7) On January 23, 2020, the European Union (Withdrawal Agreement) Act 2020 received Royal Assent. This is the legislation that will implement the withdrawal agreement negotiated by the UK and the EU.

8) January 29, 2020, The European Parliament is due to vote on the Brexit deal.

9) January 31, 2020 Brexit Day. The UK is due to formally leave the EU at 11pm.

10) March 11, 2020 - The Chancellor of the Exchequer will deliver the Budget, setting out the Government’s spending plans to smooth the UK’s path to a new relationship with the EU.

11) November 26, 2020 Deadline day? The date EU officials say a Brexit trade deal must be ready to be presented to the European Parliament if it is to be ratified by the end of 2020

Market Impact

Alright so now that everyone has a clear idea of whats happened since the last article, lets talk about the impact on the FX markets.

- The market reaction to the macroeconomic events is very straightforward. When Brexit was first announced there was a major selloff for the months that followed. This was due to the perceived issues with leaving the EU such as the stability of the economy, the value of the Euro, as well as problems with trade (E.g the Irish Backstop).

- Between October- Dec of 2016 there was a series of court cases that would decide the legality of the new trade agreements and the potential impacts. After the courts ruling was in favor of Brexit, the parliament of the UK voted to respect the outcome of the referendum and to draft the Articles of Brexit (Article 50). The market rallied bullish on this news and continued its bullish optimism until 2018 when the articles were rejected by the house of commons.

- The market showed its pessimism about a successful transition and the GBP felt a massive downswing. There was a lot of market uncertainty that followed and the global markets were massively affected by this deadlock.

- In the summer of 2019 Boris Johnson is elected as the new Prime Minister of England under the promise of fulfilling Brexit. The market took this as a sign of strength and unity for Great Britain so GBP value began to recover as more global investors saw the UK as a viable investment. GBP markets rallied massively on the back of this campaign and continued to do so until the current Corona Virus outbreak.

Conclusion

In conclusion; As Europe finds a timeline for the Corona virus relief it will be uncertain as to the strength of the Euro or the GBP. Once a timeline is established then we can see the impact on each economy and see if it was severe enough to have an impact.

Currently, Italy has had a severe outbreak of the virus and due to the traffic in and out of the country it is suspected that neighboring countries such as France and Spain are also at risk. If countries need to shut down sectors of the economy in order to cope with the efforts of quarantining the virus then the European economy will go into a recession, impacting the value of the Euro and European assets. Great Britain has announced its campaign to fight the virus by ensuring border security so GBP might be the better bet in the short term unless they experience a significant outbreak as well.

Disclaimer: This paper is the result of the analysis carried out by a analyst associated with ChartAddicts. This article does not purport to represent the views or the official policy of ChartAddicts. This is NOT investment advice.