With Britain’s shock decision in voting to leave the European Union earlier this year the GBP took a heavy beating on the exchange rate. The British Pound Sterling dropped to lows the currency hadn’t seen in decades.
The scariest part is that as much as a beating the Pound has taken in 2016 it could be just the start of very tough times ahead for Great Britain and its people.
Uncertainty All Around
The drop in the Pound’s value came because of a lot of uncertainty. A lot of uncertainty whether foreign and large businesses will pull out of the British market. A lot of uncertainty whether businesses and people will stop investing in Great Britain. On top of that there is also likely to be an assortment of trade disruptions and some multinational businesses may even start to plan to move their headquarters out of London and head to other European countries within the EU.
With Theresa May replacing David Cameron as the country’s Prime Minister the GBP only continued to drop.
In many ways the timing couldn’t have be worse considering in the immediate future there is nothing on the cards that could help strengthen sentiment towards the Pound. With no data releases or big events scheduled it may be a long while before the GBP is strong again or gets anywhere close to where it was at the start of the year.
“When Will it Bottom-Out?”
The main question for those involved with forex trading is when will the GBP bottom out? At the point that it stops losing value it may become an attractive option to invest in due to the chance it has of one day regaining some of its value.
At the end of the day that largely depends on what happens over the next few months. As far as Great Britain is concerned they need to steady the ship. Theresa May needs a plan and a vision to steer the country through the decision that they’ve made. If she can sell investors and the world at large on those plans, the GBP might begin to stabilize again.
Any information about Britain’s talks with the EU are also bound to have an effect on the value of the GBP. That effect could go both ways however and is likely to cause several swings over the next few weeks.
Most traders holding GBP who had stop-loss orders earlier this year should have sold long before now. Just looking at markets such as the USD and JPY, they both initially strengthened as the GBP declined. Though the appointment of Donald Trump as their next president saw the USD drop its value too.
For now, the safe option for traders may be to watch and wait.
Those who keen to explore other forex pairs, trading at companies such as ETX Capital, could start trading on different markets. The range that is available will ensure there is always the opportunity for a profitable trade somewhere.