In the near future, it is possible that there will be a ratio of 1:1 for the euro and sterling. Although this has negative consequences for Britons and Europeans whose money won't stretch as far as it previously did; this however, has positive consequences for UK and European eCommerce companies that want to expand their outreach to demographics that are now buying from these companies due to the favourable exchange rates stemming from the lower sterling and euro.
With the Bank of England's plans to cut interest rates within the month, this will further project the possible likelihood that the FTSE will reach new highs into 2017-2018. Mark Carney, the Governor of Bank of England joked that currently we have an "economic Brexit post-traumatic stress disorder."
However, despite the sterling taking a steep fall, this will be mainly beneficial for many UK companies and industries, particularly in eCommerce and hospitality. Just as news of Brexit hit, the UK-based Asos site was down due to the heavy volume of traffic it had from customers around the globe who were taking advantage of the lower sterling. South Korean shoppers tweeted, "“Now is the perfect time to shop directly from the UK due to the falling pound, though things may change tomorrow." The sales of European goods were said tohave doubled via the China-based eCommerce site ymaou.com after the U.K. referendum. The steep fall in sterling is attracting more online shoppers to shift from Japanese and Korean products to British ones. In addition, more tourists are projected to flock to the U.K. to shop for luxury items. U.S. shoppers, writers and analysts have dubbed the U.K. referendum, "Brexit Sales!"
It is also up to the next Prime Minister to ensure that the U.K. still has access to the single E.U. market to prevent an interruption of overseas investment and retain its position as the number one destination for foreign direct investment (FDI) in Europe. Currently, the top five nations to invest in the U.K. are the U.S., France, India, China and Japan.
To counteract the potential fallout from businesses that might now be apprehensive about investing into the U.K., in an unprecedented move, Chancellor George Osborne also recently announced plans to cut corporation taxes to less than 15 percent from 20 percent to stimulate Britain's competitive economy.
By Sierra Choi
[Disclaimer: This post is not intended as any FX nor stock market advice and is for educational purposes only.]