Will Asia Pacific Benefit Or Not From Brexit?

For several years, the term Brexit has become a household name in not only countries in Europe but also countries around the world, being the withdrawal of the United Kingdom from the European Union.

In 2012, UK Prime Minister David Cameron rejected calls for a referendum on membership in the European Union. However, he did not rule out a referendum happening in the near future. Fast forward to 24 June 2016, the people in the UK gathered and voted after a heavily publicised and contested pre-referendum period by both the ‘Leave’ and ‘Stay’ camps.

In the end, 48.1% of those who voted preferred to stay and 51.9% preferred to leave. The vote was largely split by the greater London area and Scotland being in favour of ‘Stay’, whereas most other parts of the UK voted in favor of ‘Leave’.

Nowadays, currencies often reflect the health and prospective outlook of countries’ economies. Favorable forecasts yield currency value increments and adverse ones lead to value declines. With voters supporting a Brexit, the UK is on course for major changes and a significant amount of uncertainty surrounding future economic prowess.

No matter the duration of the actual Brexit negotiations, there will be a decrease in political and economic stability. As shown in Figure 1, the British Pound (GBP) dropped in value against key global currencies since the vote on June 24 and its value will likely remain low until the UK will be able to shed a light on a (bright) future path.

Foreign travellers will likely capture this opportunity to visit London and other popular destinations in the UK. Conversely outbound travel will be impacted, certainly among more value oriented travellers that constitute a large share of the European travel market. How about Asia Pacific?