Across the Pond

Across the Pond


Not like the American or the French Revolution, there was no war fought, but a country did secede from an union. This article is not about how Brexit will affect Britain but instead how this will affect the U.S. There are a couple reasons how this will affect the average U.S. consumer.

First though we need to know what happened. Britain broke away from the European Union during a June 23 vote which sent the financial and political world into a short panic. In the U.S the Dow Jones dropped 600 points in one day but Brexit loses in the stock market were reoperated within a two week period.

The vote was close with 52% wanting to leave and 48% wanting to stay. The country has two years to create a exit treaty with the EU and analysts believe that it will be out of the EU by no earlier than the end of 2018 or else Britain will remain in the EU.

Now on to the reasons.

First, travel will be cheaper. Before the results were announced it cost $1.49 American Dollars for every $1 British Pound. After the results were announced the Dollar to Pound fell to 30 year lows. Today it cost $1.30 American Dollars for every $1 of British Pounds. Making it about 13% cheaper to travel to Great Britain than before Brexit.

The next factor is interest rates. Due to the uncertainty in markets, people are moving money into safer investments such as U.S Treasury bonds causing interest rates to fall. The current interest rate for a 30-year fixed mortgage is 3.64% down 3% from 3.75% pre Brexit levels. This means it is cheaper for families to buy a house.

The last factor is trade. Since the Dollar surged and the Pound fell this will affect how much you pay for British goods and how much they pay for American goods. In Britain it will be more expensive to buy American products including everything from cars to electronics. In the U.S it will be cheaper to buy British good which include high fashion brands like Burberry to chocolate made from Cadbury.

These are just some of the temporary effects the Brexit will cause. It has only been about three months since they voted to leave and we still do not know 100% how this will affect the global financial market. We will not know the full effects of this decision until at least 2020, which is a long way down the line.