How Low Can It Go: A Bleak Future For GBP?

In the last few months, newspapers, television stations and social media sites have been bursting at the seams with news, debate and speculation in the run up to Britain’s referendum on 23rd June. If, as many people wrongly presumed, the UK voted to stay in the EU, 24th June would have been back to work as usual and any Brexit noise would, fairly swiftly, have faded away.

As we all know, the outcome was very different and the referendum debate seems like just the beginning of what is likely to be a long, rigorous period of uncertainty and dispute. One instantaneous effect of the UK’s decision was the almost vertical decline of the Pound, which has hit two, thirty-one year lows, since 23rd June.

This shock was bad enough for GBP, however, many major banks and financial investors are warning that the currency may well fall even further. Swiss bank, Julius Baer, have already said that the Pound’s outlook for the rest of the year remains bleak, and have warned that, against the US Dollar, Britain’s currency could fall to as low as 1.1600.

Following a Gfk consumer confidence survey which showed the lowest drop in twenty-one years, John Lewis Managing Director, Andy Street, has now said that weakness in Sterling could begin to push costs higher in 2017. He also said, that greater certainty was needed over Britain's trade relationships and on the future of Europeans living and working in the country.

As we approach the school summer holidays, there will be families across Britain wincing as they look at the exchange rates when they convert their pounds into their respective currencies to spend on holiday, where, pre-Brexit, they would have seen a lot more for their money. However, some onlookers have said that a weaker currency is not necessarily a bad thing, as, in contrast, the UK may see an increase in tourism as Britain becomes more attractive to tourists who would receive more Pounds for the Dollars or Euros, than before the Brexit vote. A fragile Pound also means that carmakers and other exporters can benefit because it makes their goods cheaper and more attractive to overseas buyers.

In the last few weeks, we have seen that one country’s decision can have a profound effect on the financial markets, as well as the everyday lives of people in Britain. However, what does seem to be apparent, is that until there is more certainty about Britain’s economic future, the Great British Pound may not hit pre-referendum levels for some time to come.