Forex trading | the impact of Brexit on the Middle East

For years, people have argued that western nations and their aggressive foreign policies have undermined stability in the Middle East. Much of this can be traced back to Henry Kissenger's policies during the early 1970s, which arguably proliferated the world's disequilibrium of power and divided the Middle East at a time when nations were working towards some kind of accord.

Some said that Kissenger's desire to divide and conquer stemmed from a fear that a unified Middle East would grow to dominate the world's trade and financial markets, of course, but it's interesting to note how times have changed during the last few years. More specifically, we've seen the sustained destabilisation of the west since 2016, with Brexit fracturing the harmony of the single market and the election of populist President Donald Trump creating deep social and political divides in North America.

The Pros and Cons of Brexit for the Middle East

In the case of Brexit, there are both positive and negative connotations for the Middle East, but there's no doubt that the region is increasingly well-placed to fill specific gaps in trade and any failed deals on raw materials. After all, the MENA economies have continued to diversify in recent times, moving away from devalued traded commodities such as oil and instead embracing lucrative market such as tourism, media and financial services. So, as Brexit continues to destabilise the geopolitical climate in the west, there's no doubt that the Middle East and the Gulf states in particular can benefit from intensified levels of competition.

On a similar note, nations in MENA will also be hopeful of securing lucrative and potentially beneficial trade deals with the UK, once the government has concluded its negotiations and officially left the EU on March 29th, 2019. Much will depend on whether or not the UK can exit the single market with a viable deal, of course, but in the case that they do not the key countries in the Middle East may be able to negotiate a harder and more competitive deal.

Even if the UK leaves the EU with some form of trade agreement, they will be keen to build new deals quickly and this could force them to accept slightly unfavourable terms. Nations in the Middle East will certainly be able to add value in the form of crucial, raw materials, especially with services now accounting for a whopping 79% of all British exports.

In terms of currency and forex trading, the UAE Dirham (AED) has incurred both gains and losses as the west has continued to destabilise. This has much to do with the relationship that the AED enjoys with leading currencies such as the Pound (GBP) and the U.S. Dollar (USD), with the former enjoying peaks and troughs as Brexit negotiations have continued. After a sustained decline, however, the GBP has enjoyed gains against the AED recently, thanks largely to a number of developments that increased the likelihood of a so-called 'soft' Brexit.These gains will only be sustained if the UK leaves the EU with a deal, however, so there's still every chance that the Middle East will benefit in the wake of Brexit.

From the perspective of currency trading between the USD and AED, the AED has actively suffered as a direct result of President Trump's volatile Presidency and his battle to push through key legislative reforms. This saw the greenback gradually lose ground to its major rivals throughout 2017, meaning that the AED also saw its value decline due to its intrinsic links with the USD. A positive outcome in the wake of Brexit could compensate for these losses, however, while it's also hoped that the U.S. economy can successfully rebound in the near-term.

The Last Word – What About the Impact of Brexit on People?

On a final note, it's worth considering the impact that Brexit is likely to have on the people of the Middle East. This is far more mixed when compared with the potential benefits associated with trade and currency, so this is a particularly interesting space to watch as negotiations continue.

For those who plan to holiday in the UK, the sustained struggles of the GBP and its ability to break out of a narrow trading range mean that visitors can purchase more of this currency with the Dirham. Similarly, migrants who are sending money back home to the Middle East can benefit directly from the depreciation of the pound, not withstanding its occasional peaks on the back of positive Brexit updates.

Those living in the UK may see complications arise in the form of more stringent rules for migrants and those in work, but once again these will not be fully determined until the nation has exited the EU. This will be a cause for concern among those of Middle Eastern origins, however, as will the social divides that have emerged in the wake of the referendum vote back in 2016.