Currency value changes

After Brexit, the Sterling Pound hit a 30-year low against the US Dollar (1.3 GBP/USD). The currency markets hammered Sterling because of uncertainty surrounding economic growth, the expectation that the Bank of England (“BoE”) would drop interest rates, and the looming trade negotiations with the EU and rest of world.

A deflated British currency has arguably the most direct effect on US businesses, particularly those that depend on the UK market for sales or supplies. British goods are now cheaper internationally, while the country’s buying power has decreased. US export manufacturers, particularly of industrial goods such as hydraulic motors and oil & gas refining equipment, may see stiffer competition from cheaper British competitors.

Outside of gold (that spikes with uncertainty), Brexit also drove down commodity prices. Analysts lowered demand forecasts in the EU and UK in the face of slower economic growth. Major commodities are also denominated in US dollars and thus became relatively more expensive (the dollar became a haven for investors as the US economy is seen as strong). This price drop puts even more pressure on beleaguered US mining and extraction companies.

The largest US export industries to the UK – aerospace, machinery and precious metals – could also suffer as the country’s buying power decreases with the value of their currency.