european union: I would argue that fears that British Prime Minister Theresa May might opt for a "hard Brexit " is the most direct cause for the sterling plunge, which indicates that currency exchange rates have increasingly become a tool for political games, according to Global Times China. The implication for the yuan in all of this is that while the Chinese currency internationalization might be challenged in the short term, in the medium- to long-term this will give the yuan a chance to rise. There has been a wide spectrum of arguments about the reasons behind the "flash crash" of the sterling - a dominant global currency which is the legal tender of the second largest economy in the European Union and the fifth largest economy globally. As I would suggest, the trigger for the sterling sudden plunge was May statement that Brexit negotiations would begin by March 2017, which appears to prepare the ground for a hard Brexit, one that would pull the UK out of the single market. If the UK is headed for a hard Brexit, this would indisputably take a toll on both Britain and the EU. Therefore, the pound sudden dive can be seen as a message about market fears of potential uncertainty in Britain and the EU. More profoundly, the plunge reflects the increasingly conspicuous political attribute of currencies. Previously, it was believed that Britain would be on course for a "soft Brexit" - an outcome similar to the Norway model or the Swiss solution.
(news.financializer.com). As
reported in the news.
Tagged under european union, sterling plunge topics.