Brexit: How will Article 50 affect expats?
The UK Government has declared Article 50, beginning the formal process of an EU exit. For the first time in history, a member state is filing for divorce which brings with it a significant level of uncertainty, not least for expats on both sides of the continent.
Article 50 is the mechanism by which an EU member state can withdraw its membership, which follows two years of negotiations before making its final departure. The UK is the first member state to declare Article 50, on March 29th, the UK Government has given notice to Donald Tusk - President of the European Council, making it one of the most historic events in European politics.
Because no country has ever invoked Article 50 of the Lisbon Treaty, many expats have been asking, ‘what happens now?’.
The good news is that nothing will change during the process of Article 50 because the UK will remain an EU member until at least 2019, but even beyond this time-frame it’s highly likely that both the UK and remaining EU member states will guarantee the rights of expats, as highlighted by the President of the European Commission last week.
“This is not about bargaining, this is about respecting human dignity.” – Jean-Claude Juncker
Expats can take comfort in knowing that both the UK and EU remain committed to prioritising expat’s rights early in the negotiations, but also that the declaration of Article 50 will not result in any loss of citizenship.
If no such deal can be reached at the end of negotiations then EU member states will vote on whether to extend negotiations further.
Michel Barnier, the EU’s Chief negotiator for Brexit has expressed the need for a successful future relationship with the UK, citing a transitional deal as one option to avoid a cliff-edge Brexit.
We are starting to see signs of a softer approach to Brexit negotiations from EU Officials, which could bode well for Britain and other EU states. Even though we will not see any political changes during Article 50, there is still the possibility that we will see major fluctuations in rates of exchange, potentially putting those with time sensitive currency requirements at risk.
A volatile period for GBP/EUR
Now that Article 50 has been invoked, we are expecting to see large fluctuations in currency exchange rates. This volatility is likely to continue until formal negotiations have commenced.
Not only will markets be looking for signs of positive outcomes from negotiations on both sides, but also that there are plans in place for the interim period whilst the British and European economies adjust to this unprecedented separation. This process is likely to take time.
Due to this, if you have a requirement for purchasing Pounds or Euros during what is likely to be a turbulent time it may be a good idea to consider the different contract options available to reduce risk. A forward contract for example, will enable you to secure a rate of exchange available at the time for up to 18 months, leaving you secure in the knowledge that your exchange rate will remain unaffected by the changing markets for this period.
By asking a specialist currency exchange brokerage to set up a limit order and a stop loss concurrently, you can set upper and lower levels of trading, therefore maximising your return.
Another option available is the concurrent use of a stop loss and a limit order with a specialist currency exchange broker, which enables to you set upper and lower levels of trading, maximising your return and limiting your risk.
Chief Market Analyst
Foreign Currency Direct
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