The British Pound (GBP) is the currency that is used for trading in the British pound market. It is the main international currency that trades in the futures and options markets. Due to its value and the fact that it is the largest international currency by far, the GBP is usually not taken lightly when traded.
This is because of the fact that since its foundation in 1931, the British Pound has been valued by investors and traders around the world. Unlike the Euro or the US Dollar, which are often seen as safe havens by those who wish to invest in them, the British Pound is not.
As a result, the British Pound’s value is directly related to the risks involved in investing in it. As its value is directly connected to the uncertainty surrounding the country’s departure from the European Union, the fluctuations of the value of the British Pound is closely watched.
Despite the fact that the British Pound (GBP) value has been fluctuating quite dramatically throughout the years, investors have been somewhat lulled into a false sense of security by it, only to be caught off guard by what’s in store for them at the end of the road. While the uncertainty is one thing, the unpredictability of how Brexit will play out is something else entirely.
Central banks are seeing a good deal of volatility in the price of the British Pound due to the turmoil that has been created in financial markets over the past couple of weeks. Of course, all of this instability is being caused by uncertainty about how Brexit will unfold. And with Brexit having the potential to affect trade all over the world, it’s no wonder that the British Pound is coming under intense pressure.
Large global firms have already started to shift their manufacturing from the UK in order to increase production costs. This is a fairly significant change that may turn out to be detrimental to the entire British economy if not handled properly. This is why the uncertainty surrounding Brexit is so important.
At the moment, the biggest winners from the rise in the British Pound are hedge funds, which are known to have the most open and flexible strategies when it comes to trading currencies. Due to the fact that they get paid a percentage of profits made from their investments, it doesn’t make sense for them to take a loss on their investment that would be incurred by investing in the currency market.
Those on the other side of the fence will see a huge positive change in the British Pound in the near future, which can only help the economy by contributing to export growth. And because the pound was devalued during the Brexit process, many small businesses have begun to lose their competitiveness in the market. As a result, the UK has seen an increase in demand for goods from other countries, thus driving up the price of goods in the country.
Unfortunately, there is also the possibility that the British economy may actually lose some money when this new supply glut arrives. There are two reasons for this possibility:
o The UK might see a decrease in demand increases the chances of the pound depreciation. Those who believe that the British Pound will continue to stay in the gold standard will want to watch this possibility closely, as it will increase the risk of the currency not keeping up with the economic recovery.
o Central banks may start to begin purchasing the British Pound, which will likely be met with strong opposition from investors and traders. The Central Banks of the Eurozone has already announced that they will take over and manage a portion of the financial assets in the British market, which will surely be met with opposition by traders. All of these factors will only create a bigger risk market for traders. And as we approach the end of 2020, the problems in the British Pound are likely to continue to grow.