Infographic

Brexit Means Bad News for the British Pound

The markets think leaving the European Union won’t be a sterling outcome.

HP-pound-collapse-dollar-britain-brexit.4
HP-pound-collapse-dollar-britain-brexit.4

The British pound hit a two-year low of $1.212 against the U.S. dollar on Tuesday. It’s just the latest blow for the currency following several days of decline since Boris Johnson became prime minister of the United Kingdom.

The British pound hit a two-year low of $1.212 against the U.S. dollar on Tuesday. It’s just the latest blow for the currency following several days of decline since Boris Johnson became prime minister of the United Kingdom.

Johnson’s indications he would take a no-deal Brexit have shaken confidence in the pound and sent its value on a downward trajectory since July 24.

As seen in the chart below, British sterling slumped after the Brexit referendum in 2016—and has never fully recovered.



After the pound 2016 trading at nearly $1.50 against the dollar, two significant drops followed later that year: In June, after the Brexit referendum results were announced, and then in September, after the reelection of Labour leader Jeremy Corbyn, who at the time supported Brexit. Despite a recovery in 2017, the pound slumped again the following year as a deal between the U.K. and the European Union looked less and less likely.

Prime Minister Theresa May surviving a no-confidence vote in December 2018 was followed by a small uptick in the pound’s value. But by the time May announced she would step down on May 24, the pound was back to where it had traded before the no-confidence vote.

The value of currency is determined by several factors, but one conclusion that can be drawn from this chart is that events favoring a hard-line exit from the European Union have usually led to the pound’s depreciation.

 

  Twitter: @seekayhickey

More from Foreign Policy

A photo illustration shows Chinese President Xi Jinping and U.S. President Joe Biden posing on pedestals atop the bipolar world order, with Indian Prime Minister Narendra Modi, European Commission President Ursula von der Leyen, and Russian President Vladamir Putin standing below on a gridded floor.
A photo illustration shows Chinese President Xi Jinping and U.S. President Joe Biden posing on pedestals atop the bipolar world order, with Indian Prime Minister Narendra Modi, European Commission President Ursula von der Leyen, and Russian President Vladamir Putin standing below on a gridded floor.

No, the World Is Not Multipolar

The idea of emerging power centers is popular but wrong—and could lead to serious policy mistakes.

A view from the cockpit shows backlit control panels and two pilots inside a KC-130J aerial refueler en route from Williamtown to Darwin as the sun sets on the horizon.
A view from the cockpit shows backlit control panels and two pilots inside a KC-130J aerial refueler en route from Williamtown to Darwin as the sun sets on the horizon.

America Prepares for a Pacific War With China It Doesn’t Want

Embedded with U.S. forces in the Pacific, I saw the dilemmas of deterrence firsthand.

The Chinese flag is raised during the opening ceremony of the Beijing Winter Olympics at Beijing National Stadium on Feb. 4, 2022.
The Chinese flag is raised during the opening ceremony of the Beijing Winter Olympics at Beijing National Stadium on Feb. 4, 2022.

America Can’t Stop China’s Rise

And it should stop trying.

Ukrainian President Volodymyr Zelensky looks on prior a meeting with European Union leaders in Mariinsky Palace, in Kyiv, on June 16, 2022.
Ukrainian President Volodymyr Zelensky looks on prior a meeting with European Union leaders in Mariinsky Palace, in Kyiv, on June 16, 2022.

The Morality of Ukraine’s War Is Very Murky

The ethical calculations are less clear than you might think.