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Where is the pound today and what can we expect in the coming months?

Tim Sheehan • May 13, 2020

Since the start of lock down and having seen a dramatic reduction in the value of the pound, when we saw the lowest levels against the dollar and euro of 1.1492 and 1.0511 respectively, we have predictably seen a welcomed bounce back to highs of 1.2640 and 1.1525 but no more.

This bounce back has from then remained in a 2-4 cent, on both currencies, trading range, very much dictated by the severity of COVID-19 in the United Kingdom.


We now seem to be entering the faze of whichever country or economy recovers from the effects of the virus the quickest and can get their economies up and running again will have the advantage or disadvantage of their currency strengthening as a sign of the start of green shoots of recovery and things getting back to normal.


The British Pound is now the worst-performing major currency of the past day, week and month according to data, as multiple pressures start to build on the UK currency in the form of trade negotiation uncertainty, Bank of England policy and the country's slow exit from lockdown.


In the past weeks we have seen the pound strengthen on the back of improvements in the stock market but this is not a given in the future as fresh fundamental drivers will take hold.


Some of these triggers came from the BOE suggesting that more easing will be needed in due course and all options are under review to deliver this. From a currency market perspective, comments on interest rates are perhaps the more interesting as said cutting interest rates into negative territory "would potentially do more harm than good".


The fundamentals continue to focus on the UK’s lockdown-easing plans and the state of EU/UK Brexit transition talks. It has been stated that a hard Brexit in becoming increasing likely as as negotiations between Britain and the European Union have stalled.


The UK and EU have this week begun the penultimate round of negotiations aimed at securing a provisional agreement ahead of the July European Council meeting, at which it must be determined whether an extension be granted to extend trade negotiations.



All in all it is very difficult to predict where the value of the pound will be in the coming months as we have to contend with Brexit and well the already slowing down of the UK economy.


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