Vlad Demochko
Not so long ago, the British Pound crashed by 2,1% at a time versus the U.S. Dollar all the way down to 1,4102. MasterForex-V Academy reports that this is the biggest daily drop since 2009. The price crash instantly followed the speech by Mayor of London Boris Johnson. The thing is that he supported the idea of quitting the European Union which is no known as the British exit or Brexit for short.
According to Sam Hill, an economist for RBC Capital Markets, the existing weakness of the British Pound reflects the likelihood of the so-called Brexit. British politicians are now at odds over the issue. Yet, the confrontation seems to be considerable than expected by the Prime Minister.
It is also interesting to note that the British Pound has already lost 17% against its American counterpart over the last 18 months. Ove of the key reasons for this weakness is the uncertainty regarding the Bank of England’s future interest rates. While the Fed raised the interest rates in late 2015, the Bank of England seems to be reluctant to do the same in the near future. With that being said, the British Pound and GBP-denominated assets become less attractive for investors, which further translates into the weakness of the U.K.’s national currency.
For those of you who don’t know, the Brexit referendum is planned for June 23rd, 2016. A few weeks ago, London made a deal with Brussels. The deal implies a special status for the U.K. within the scope of the European Union. This status implies freedom in terms of running British financial institutions, interpreting E.U. political decisions and so on…
Vlad Demochko
