Yesterday was not the best day for British pound that was harmed by Bank of England Governor Mark Carney speech. It has been announced that The Bank of England revised the growth outlook that is forecasted to be worse than anticipated originally. With existing pound weakness and bad influence of “Super Thursday” that was just last drop for pound to go below 1.11 against Euro. As you probably heard UK economy has high chances of slowing down because of high inflation figures and uncertainty with Brexit. Markets are reacting accordingly and pound exchange rate against EUR and USD are hitting year’s minimums.
The situation is just consequence of multiple things:
- Euro becomes stronger not only against pounds but also US dollar. With a lot of nose around Donald Trump and his possible cooperation with Putin weakens the dollar.
- European Union seems to get stabilizing and also there is high chance QE program will be tapered this autumn.
- UK and EU still can’t come to any agreement about Brexit that is likely the most influencing factor.
The short term forecast for British pounds is still negative and I don’t expect the situation to improve over next months. If you hold funds in EUR or USD then it’s great opportunity to buy pounds. Everyone understands that the pounds is really undervalued and very likely will recover in long term. Just recall 1.45 rate against Euro middle of the last year. It’s not the first time pound is falling down and we already saw parity between pound and Euro. So let’s see what will happen next, it’s hot summer this year.