In for the pound – Is the UK currency in crisis?

The sterling has endured a pounding in foreign exchange markets over the past month, hitting its lowest level against the dollar since 2009.  Here’s the top 5 as to why:

1   The UK’s industrial sector has been disappointing: output fell 0.7 per cent in November from previous months, the sharpest decline since early 2013.  To boot, UK domestic issues have caused international businesses to watch and wait to determine their next moves for further growth locally.

2   The upcoming referendum on the UK’s continued membership of the EU has also attracted attention.  The markets are closely watching economic data and are casting a critical eye over moves on exchange rates as well as the threat albeit slim, of a Brexit.

3   Instability in the Middle East, the unknown threats from North Korea, terrorism, cyber warfare, the U.S. Presidential Elections and new hostility from Russia towards its neighbours. 

4   The three-month forecast for GBP/USD is 1.48 (from 1.52 previously), while the 12-month forecast remains unchanged at 1.58.   So, although its no change from last year, it is still small change overall and that’s because the Bank of England is purposely enforcing a rigid policy of stability in choppy waters.

5   London whilst remaining the World’s most favoured City, is fraught with its own issues as the Government starts to strip away at tax loops and investment opportunities for foreign HNWs making it a less attractive option.

All in all, brace yourselves for a year or turmoil according to market pundits and beware a slowdown in imports and exports. 

Do however look forward to a reduction in fuel prices as well as stable interest rates, steady M&A deals across Western markets, low inflation and increase in employment. 

Tourism is set to remain the same as last year with no fears of a decline in global travel because of a weakened pound, although some holiday goers feared a delay in booking until late February as opposed to end of January peaks in purchases.  

Apparently holiday sites are set to introduce a host of deals to lure UK punters.

How has the pound affected you? Let us know. Start a blog. Contact us, contact each other.

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