Oliver Godwin
October 12, 2021

How Resilient is GBP

Many mainstream media outlets have been suggesting the UK currency should be in crisis however the reality is different. Many prominent publications (Express / Daily Mail / Bloomberg) warned of a Brexit style existential crisis, but we have seen the Pound hit 18-month highs in recent trading days. 

Yes, the UK is suffering notable supply-side challenges including the recent fuel shortage, but this issue is not unique to the UK. In the EU there is a shortfall of 400k HGV drivers while the continent is exposed to gas price fluctuations as noted by Euronews “While the crisis is global, Europe has been hit by several aggravating factors that could make the crisis more acute”. 

RBC Capital Market are particularly negative on the Pound’s prospects “expect grinding GBP underperformance to continue into the medium-term”. RBC point towards the Pound acting like an Emerging Market as opposed to a mature market in recent times, siting the panic buying of fuel as an example. 

Morgan Stanley has a similar viewpoint stating the UK “has become the proverbial lightening rod for investor concerns around inflation given higher relative vulnerabilities to rising energy costs and supply distribution and a more hawkish sounding Bank of England”.  

The Pound started 2021 in a strong fashion, on the back of Brexit completion and a strong vaccination programme. However, since April the currency has plateaued against the euro and US dollar. The upcoming concerns for the Pound will be regarding Brexit anxieties surfacing its head once again as well as UK inflation and the price of goods rising. 

To keep on top of factors affecting the pounds value, contact your account manager here at Lumon. 

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