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Brexit’s Looming FX Risk For SMBs

Next week, on Dec. 11, a new vote looms on Brexit, where the United Kingdom Parliament will accept or reject Prime Minister Theresa May’s proposed deal on Britain’s divorce from the European Union (EU). The draft of what’s to come spans roughly 600 pages, offering a glimpse of approval or disapproval on everything from citizens’ rights to the state of the Irish border, and to trade, of course.

To that end (on trade and specifically cross-border transactions), potential impacts for small businesses (SMBs) loom no matter which way the vote tips.

Nawaz Ali, senior currency strategist at Western Union, told PYMNTS in a written exchange that “SMBs could be exposed to significant sterling fluctuation. If the current Brexit deal passes through Parliament, GBP/USD could rally [toward] $1.30 to $1.32 and GBP/EUR could rise [toward] €1.15 [$1.30 USD] or higher.”

Should a deal not be approved, the downside risk for the pound should materialize, which could leave the door open to $1.25 or lower — testing the GBP/USD lows of $1.26 this year. Meanwhile, GBP/EUR could drop to €1.11 or €1.10.

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