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Brexit in dollars per pound

You may have heard of Brexit, a portmanteau of Britain and exit. The exit refers to the European Union: On June 23, 2016, U.K. citizens voted to leave the EU, which could have many possible consequences, such as lowering investment and production and reducing imports and exports between the U.K. and the EU. Not much has changed yet; the full effects will take time to materialize. But some financial variables in the U.K. did move after the Brexit vote, including the exchange rate.

The graph shows the evolution of the dollar/pound exchange rate since the beginning of 2016. The red line marks the day of the vote. Before the vote, the exchange rate fluctuated around 1.45 dollars per pound; after the vote, the pound depreciated sharply (relative to the dollar) and the exchange has fluctuated around 1.32 dollars per pound since then. This depreciation may reflect negative expectations about the U.K.’s international trade and its economy in general after the Brexit vote.

How this graph was created: Search for “US UK foreign exchange rate,” select the daily series with units “U.S. Dollars to One British Pound, Not Seasonally Adjusted,” and limit the date range from 2016-01-01 to the present. Now, to create the red line to show when the Brexit vote occurred: In the “Edit Graph” section (orange button in the upper right hand corner), use the “Add Line” option to create a user-defined line and set the start date and end date for that line to be 2016-06-23.

Suggested by Maximiliano Dvorkin.

View on FRED, series used in this post: DEXUSUK

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