While households and business-owners have yet to fully understand the impact of Brexit, for now the UK economy is continuing to showcase robust growth. At the heart of this widespread GDP growth is a rise in the demand for exports, with a weakened pound helps to create more competitively priced and accessible goods.
This type of trend also highlights the fascinating nature of currency trader, and the way in which certain businesses (and investors) are able to profit even as the value of their underlying asset depreciates. Such liquidity makes the concept of forex trading a popular one, which continues to turnover $5.1 trillion each day despite a recent decline in the market’s fortunes.
How Currency Trading Can Benefit Firms in the Financial Sector
As a general rule, businesses that operate in the financial services sector have an extended opportunity to benefit from currency trading and its associated economic trends. With this in mind, let’s take a look at how such companies can leverage these opportunities in the current climate:
1. Trade Currency and Back Against the Pound
In some respects, the British Pound (GBP) has continued to showcase resilience against the backdrop of Brexit, despite plunging to record lows on several occasions during the last year. More recently, the GBP has enjoyed significant gains against the Euro (EUR) and the New Zealand Dollar (NZD), causing some to question the extent of the supposed toll that Brexit had taken on the currency.
Experts will know that the GBP continues to trade within a restricted range, while it is also set to slump to a new, post-referendum low against the U.S. Dollar (USD) now that Article 50 has been triggered.
This trend is likely to continue, which in turn creates a significant opportunity for those with financial expertise to speculate and invest capital into the USD / GBP pairing. While this pairing historically sees some form of reversal as the pound rallies in April, we should not expect such a trend this time around as investors continue to profit from the plight of the GBP.
2. Understand That Commodity Prices Will Also Be Impacted
As the devaluation of the GBP / USD continues, so too the cost of key British imports and exports vary wildly. This can also influence any investment plans that your fiscal business or clients may have, as while some commodities will benefit from devaluation (namely exports) others may see a significant fall in demand as their prices soar.
Let’s take gold, for example, which despite an initial decline at the beginning of the year is likely to see significant gains as the Brexit negotiations begin. This will see the precious metal become a viable store of wealth over the course of the next year or so, which in turn enables investors to diversify their portfolios.
This is an important lesson to learn, as the devaluation of specific currencies also impact directly on commodity prices and factors like supply and demand.
3. Tailor Pricing to Maximise Opportunity
Regardless of the precise nature of the financial service that you deliver, you will charge a price for your time, expertise and (in some instances) products. As you start to study currency and the associated economic trends, however, you may identify the need to restructure your pricing in order to respect real-time supply and demand.
In the current economy, for example, those who export financial services overseas may see greater demand due to the devaluation of the pound. This will apply to all competing firms within your market, however, so it is important to create a price that pays respect to your margins while also incentivising clients.
The same principle applies if you export financial products or software, so you must pay attention to currency trends and prices and how they impact the level of demand for your proposition.