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The Pound Post Brexit: New Lows

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The Pound Post Brexit: New Lows

After Brexit, the pound has reached its lowest point in comparison to the dollar in the past thirty years. 

Brexit is the recent vote of Britain to exit the European Union.

The following list shows the top GBP exchange rates. 

You can see that the Euro falls extremely low. 

Thus projecting an exchange rate currency of 1 GBP:

  • Euro- 1.16
  • USD- 1.29
  • AUD- 1.72
  • INR- 87.15
  • CAD- 1.67
  • AED- 4.75
  • CHF- 1.26
  • THB- 45.53
  • NZD- 1.81

What Does this Mean for The Pound?

The pound hasn’t been this low against the euro since 2013. 

It has sank to $1.30, proving more that Brexit is damaging the economy in the U.K.

M&G Investments suspended a 4.4 billion-pound real-estate fund on Tuesday. 

This came after some redemption requests were made by Standard Life Investments and Aviva Investors.

4.4 billion pounds is the equivalent of 5.7 billion dollars.

The Bank of England Speaks

Governor Mark Carney of the Bank of England came equipped with tools that could help contain the fallout from the United Kingdom’s decision as the pound briefly pared its losses.

Carney spoke in London, stating that his worries about the pound declining had been substantiated since the Brexit vote took place. 

He further indicated that it wouldn’t be long before the pound not only began to drop, but began setting new lows.

Thu Lan Nguyen, who is employed as a currency strategist at the Commerzbank AG located in Frankfurt, stated that Carney wasn’t the only one nervous about the value of the pound. 

He said that the sterling market was faced with a lot of nervousness right now.

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What Do the Numbers Say?

The pound dropped around 2.2 percent. 

It reached its lowest point since the year 1985 at $1.3000. 

It did come back up to $1.3015 at one point. 

 

The Euro further slid to 85.09 per euro, another 1.4 percent downfall. 

This took place after it had briefly touched 85.48. 

When it hit 85.48, it was already at its weakest point since October of 2013.

What’s The Word?

It is no secret that some analysts changed their original forecast for the pound after the referendum took place. 

Almost all of these are expecting that the pound is not going to get any stronger. 

In fact, many of them are saying that it will not only remain weak, but likely continue its downward decline.

A survey conducted by Bloomberg contained 42 new predictions. 

All but five of these predictions saw the pound falling below $ 1.30 by the end of this year.

The following graph shows Economic Forecasts for the United Kingdom. 

This information was taken from Trading Economics:

p1.2

There was data published by the Centre for Economics and Business Research.

YouGov plc also published data Tuesday. 

This data showed the negative economic outlook following the referendum that took place in the United Kingdom on June 23. 

Not only was the negative outlook widespread, but the data published showed that this prospect had nearly doubled after the referendum took place.

What Can Be Done?

The Financial Stability Report, which is published every other year by the Bank of England, was released Tuesday. 

In this report, the Bank of England stated that they wanted to ease the concerns by cutting the capital requirements that it currently holds for lenders in the United Kingdom. 

The Bank of England further pledged that it would implement any other step, measure, or action that was needed to rectify the problem and find a solution.

There was a press conference held in which the Bank of England was able to try and explain the report. 

Carney spoke at the press conference and stated that the Bank of England’s plan for after Brexit is working. 

However, he also warned that there was no way for officials to be able to offset all of the consequences that the result of the referendum triggered.

Magic Eight Ball, Is There a Recession Coming? “It is likely.”

Bloomberg surveyed economists asking about the United Kingdom’s economy. 

Almost three-fourths expect the economy to be facing a recession shortly.

Investors are also showing data that is weaker than what was anticipated. 

This shows that the referendum was affecting the economy before the vote to leave actually took place.

This week, numerous reports have shown United Kingdom construction shrank unexpectedly at its fastest pace since June 2009. 

Growth in services output also slowed. 

Real-estate companies and housebuilders also saw shares fall on Tuesday, in spite of the fact that the primary stock market rallied.

Nick Parsons stated that Carney is ready to use anything he can to help fix the problems the economy is facing. 

He further indicated that meant weaker pound and further easing to the overall market. 

Nick Parsons is employed at the National Australia Bank in London as the head of research for the United Kingdom and Europe.

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