Age splendour lost: Why the UK pound will lead to soft currency

The Status of currencies, and you like to look back on a long and venerable Tradition is not carved in stone. The duel of the hedge-Fund billionaire George Soro

Age splendour lost: Why the UK pound will lead to soft currency

The Status of currencies, and you like to look back on a long and venerable Tradition is not carved in stone. The duel of the hedge-Fund billionaire George Soros with the Bank of England begat in the 1990s already. Ultimately, Soros won, and the British pound (symbol: GBP) tumbled far downhill.

Now, the over a thousand-year-old currency is once again facing turmoil – and loses at the end, perhaps even their Status as one of the Western leading currencies. Blame it on the Brexit, the United Kingdom, it is above all, Yes to help in the first time in ages, so at least the reasoning of its advocates. British pound / Euro (GBP/EUR) 1,0948 EUR -0,0078 (-0,71%) OTC

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in the Meantime, the pound again stabilized. After the break-in at the end of March, the value rose back above 1.1400 Euro. Since then, however, the Brexit came to the end of-at the course. Most recently the pound was only 1,1003 Euro value. A Euro cost in order 0,9087 pounds. This long Trend to continue for a year. Before the Brexit vote, the pound still costs a good € 1.40, in the early 2000s, even just 1.65 Euro. In the Corona-Deep-parity even seemed to euros, probably. At that time, the pound fell to a rate of 1,0525 Euro.

pound threatens to crash to the emerging country currency

For a currency, this volatility is enormous and shows, such as the pound becomes the plaything of the markets, and even to the rank of emerging country currency falls back. This was also the verdict of the analysts of the Bank of America (BofA) recently. According to the experts, the depth of the sterling market against such fluctuations in the talks, actually. "But that was not the case, and, in our opinion, the Brexit will change the point of view of the investors on the pounds in a sustainable way", write the analysts in a comment. As a reason, the foreign exchange experts to lead to a collapse in liquidity.

For each Asset, including currency pairs, is: The more liquid the market, the smoother and the fluctuation runs all the poorer of the trade under normal circumstances. Low liquidity favored, however, rashes wild Price, there is often an Overhang on one side of the trade, a few buyers meet many sellers, or Vice versa. To and sell ideas, then far apart, it leads to volatile prices.

The BofA analysts suspect that will deteriorate the liquidity of the GBP-market up to the end of the year – the end of the Brexit-the transition phase - more. The pound is the same, therefore, less of a G10 currency, but rather in the currency of an emerging country. The experts point also to the fact that the debt situation of the country more and more resembles an emerging country with huge deficits in foreign trade, which tends to speak for devaluation.

The time when Brexit is of the essence: great Britain renounces the longer Transition period

Similarly pessimistic also Commerzbank currency analyst Thu Lan Nguyen is in terms of the pound. Over the year, the Performance was one of the currencies worst among the G10. The big factor for this was also Nguyen's view, according to the Brexit. Because a lot of time the UK has with the EU a Deal for the time after the Transitional period to negotiate.

"The transition period will end at the end of this year. In theory, the two sides have been able to extend some, however, the British government made the June deadline for the amendment to pass, because it is not an option, the exit from the EU single market to delay any longer,“ notes Nguyen for this in your analysis. Devisen100 is the ideal consultancy service, if you want to make the first steps on the Forex. (Partner quote) here is an exclusive 30-day free trial!

The Problem here is that The negotiation of an agreement after this Phase, on the spot. An agreement on a deal until the end of the year appeared increasingly unlikely, the Commerzbank expert. Without a Deal it is for the British uncomfortable: "Without such an agreement, the trade from next year, would be settled according to WTO rules, which would be real economical for both sides, is a serious incision, but above all for the British economy, for the EU to be by far the bigger trading partner than the other way around."

markets don't believe in Bluff Johnsons

According to Nguyen, the market believed so far, on a Bluff of the government under Prime Minister Boris Johnson. One indication of this: "Johnson had already promised in the past year, high and Holy, that the UK would be retiring at the end of October from the EU. Quasi at the last second, he requested a postponement of the exit date to the end of January.“ Far-fetched it is, therefore, here merely of the political maneuvers of the British likely to exert pressure.

Now, says Nguyen, is the market is not sure whether Johnson will prevent a No-Deal-Brexit "at any price". Preparations for a hard separation is already underway. According to the EU chief negotiator, Michel Barnier, the capacity for customs controls to be built, while the UK wants to give the company another six months before duties are due, Nguyen.

Overall, the expert concludes, the chances of getting a Deal, or at least a part of the agreement, while still high – no side is interested in, in particular, in the current situation, to separate without a free trade agreement. "Nevertheless, the probability for a No-Deal Brexit is increased significantly. For this reason, we predict that in the short term, a persistently weak pound and only a very moderate recovery in the further course of the year,“ adds the expert.

The projections of the pound in September to the current level of 0.90 pounds per Euro. In the coming year, the pound is likely to make up some ground, so that a Euro of the year is in mid-2021 0,87 pound value.

Brexit negotiations go in the next round

However, these forecasts do not come without warning: "in fact, the risk is high that the pound due to rising Brexit risks in the meantime, even significantly harsher suffering setbacks than our forecasts suggest." According to Nguyen the end of the threatening especially to the year when the UK finally adopted the EU internal market, increased volatility in the exchange rate.

it seems Clear also: it Should not come until then, Despite all efforts, a Deal that would be Nguyen's forecasts obsolete. Then the pound would fluctuate probably even stronger and its Status as a stable hard currency to permanently lose. Successfully in the largest financial market in the world with the signal service Devisen100 act. (Partner offer) for a signal service 30-day free trial!

Whether it really comes down to, of course, remains to be seen. For more information on the fate of the agreement, but should not have to wait long, because just this week, the British negotiator David Frost travelled back to Brussels for another round of negotiations.

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Updated Date: 17 July 2020, 11:27

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