Brexit has left businesses looking at the pound and either feeling miserable at its current state or excited by its future prospect. But more than the pound, or the euro for that matter, the most urgent risk for markets to factor in depends on what happens to the dollar.
Whichever side of the fence you’re on in terms of Brexit, an even bigger game changer is playing out right now on the other side of the pond. Experts fear a Donald Trump win and the delivery of his ‘America First’ economic plan would be bad news for the US.
“His plan would threaten over 70 years of proven work that has boosted long-term economic well being,” says Mark T Williams, a finance expert at Boston University.
That’s not to say the future looks bright in the case of a Hillary Clinton win, with economic analysts like Larry Kudlow predicting her economic plan would “deliver more stagnant growth, falling wages, dropping productivity, and depressed investment”.
How will all this effect SME owners? Experts such as Forbes are announcing ‘Donald Trump Would Be The Worst President For Small Businesses’, while Hillary Clinton’s tax hike plans – likely to negatively affect the already declining capital investment for new business start-ups – has the likes of The Washington Times calling her plans “the kiss of death” for small businesses.
One thing is clear: whatever the outcome, the US Presidential elections will have global repercussions, especially on currency markets. Regardless of whether the mood is optimistic or negative, the fact remains the sterling has dropped around 15% against the dollar and other currencies since Brexit, with only faith or fear guiding businesses forward.
It’s clear SME owners simply cannot get caught unawares again. They need to be better prepared for all eventualities, and start planning ways to make the pennies, euros and cents work for them whichever way they may rise or fall.
“The current economic uncertainty had increased currency volatility, and many businesses are still struggling to come to terms with the new Brexit reality,” says Nawaz Ali, a Currency Strategist at Western Union Business Solutions.
“This is making it even more challenging to find the right strategy to manage foreign cash flows and to protect profits. It is really important companies understand their FX exposure and have a plan in place to mitigate risk due to this significant US event,” he told Huff Post.
At a time when opinion, hunches, predictions and outright admissions of uncertainty seem to be dictating all reports on Brexit and the US election, businesses need facts they can work with. A good financial planning tool is essential for helping businesses develop strategies for both short and long term growth, make cash flow visibility more transparent and stay on top of risk management.
To help small business owners calculate the risks and connect freely with clients around the world, the WU EDGE – a free technology platform that offers the visibility of FX exposure over the coming months – gets our vote.