People who have been keeping a close eye on the financial sector may have noticed that there is one very worrisome trend right now. Despite what financial experts may want you to believe, the British pound is not doing well by any means. In fact, the Pound Sterling has hit the lowest point in the past 31 years. The Brexit is starting to leave its lasting marks on the national currency.
More Red Candles For GBP Traders
Anyone who is dealing with British pounds right now is not enjoying it all that much. Now that the currency has reached a new low for the first time in 31 years, things are looking worse than ever. In fact, it is expected that the value will continue to decline over the coming weeks. Ever since the Brexit happened, the GBP took a 16% haircut.
Politics play a big role in the value of any national currency. Now that the UK is formalizing its departure from the European Union, uncertain times are on the horizon. Investors are concerned the UK economy will take a significant hit when this procedure is finalized, sending the value of the British pound down from US$1.30 to US$1.16 this week.
But politics alone cannot keep things afloat, even though they can certainly make the situation worse. On the financial front, the United Kingdom may lose its “free access” to European financial markets, which would make it less attractive to large firms. It could also cost the nation the crown of “financial capital of the world,” as well as that of “major fintech hub.”
But perhaps the biggest culprit is the UK’s central bank policy. Throughout the years, central banks have gotten a far worse reputation than ever before. This is partially due to quantitative easing and helicopter money as ways to solve financial problems, rather than to address the core issues.
A devaluation of the British Pound, similarly to what has happened to the Yuan, is not unlikely. A devalued GBP would boost London’s multinational enterprises. All of this seems to favor the alternative finance sector, though, and if the Pound Sterling continues to fall, consumers and enterprises may look for other solutions.
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