WellTax Blog

Analysis and trend of the Pound Sterling

June 26, 2020

As is now well known, the pound has long been paying duties due to the British geopolitical situation (Brexit in particular) and recently also to Covid-19, which led to a 20% decrease in GDP in April, in addition to an increase in unemployment higher than expected.

After a partial recovery against the euro and the dollar in March and April, the pound is now losing ground again, this time not only against the two currencies mentioned above, but also against the Japanese yen.

In recent days, the British pound has lost further ground, exceeding 0.90 against the euro. Even against the US dollar and the Japanese yen the situation is not better: the pound is now trading at less than 1.22 dollars and 132.47 yen (compared to 144.1 in January).

The downturn in the pound sterling in recent years has even led some experts to ask themselves whether it could be classified as an emerging currency. In fact, the trend recorded by the pound in recent months is much more similar to the Mexican peso than to the US dollar.

Through a monetary policy of low interest rates of the Bank of England and with a balance of trade which led to the creation of twin deficits (fiscal deficit combined with the balance of payments deficit), the British pound is becoming more and more similar, at least based on its own performance, to an emerging currency (reflecting the economic conditions of the United Kingdom).

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Photo credit: Christine Roy

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