What Future Holds for The Great Britain Pound?

By currexy.com, 05 Oct 2017
GBP exchange rates
Future of pound exchange rates and new banknotes (currexy.com)

Great Britain’s Pound had been slumping against major foreign exchange currencies in the past couple of months, primarily because the sterling had been under a lot of pressure due to concerns surrounding brexit. Investors, around the globe, were deeply concerned regarding United Kingdom’s future economic conditions, especially if it chose to exit from the European Union. However, contrary to their expectations, the Pound has gained from the uncertainties surrounding other economies. The current rise in Sterling levels has come as a positive change for investors who were desperately waiting for the currency to gain some strength. Read on to find out more GBP forecast for the upcoming months and also discover whether investing in GBP (Great Britain Pound) is safe or not.

Why was Pound under Pressure?

The GBP also referred to as sterling or pound is an extremely important currency for traders worldwide, both from economic and financial point of view. However, the Pound was under a great deal of pressure until recently. As a result, economists and financial experts were assuming that Britain’s exit from the European Union, would impact the sterling negatively but the pound has gained significant strength instead. After hovering at 1.2933 in the month of August, the Pound reached 1.34189 on 28th of September 2017. This happened primarily due to recent twists in the investor sentiments, following which more and more investors are now interested in buying Euros using the British Pound.

Brexit Referendum-What are Economists Indicating?

Earlier the pound had dropped by around seven percent, at the beginning of September after the Central Bank announced that it would hike its interest rate. In fact, financial experts and analysts were of the opinion that the Pound would witness significant losses in the days to come. They were fearful of Britain’s decision to exit the European Union and were under the impression that it would further hurt the investors’ sentiments.
Post the United Kingdom’s European Union Membership referendum, wherein Britain decided to exit the EU, investor sentiments, with regard to the pound, has only improved. In fact, when compared to the Euros, British pound has gained strength in the past few days, especially since rumors surrounding a rate hike by UK’s Central Bank has also gained ground. According to financial analysts and economists, the Bank of England may hike its interest rate in the month of November. Given that inflation is already high in the United Kingdom, the banks would obviously hike the rates to curb inflation but if the average earnings fail to match the rising inflationary pressures, then the country’s economic growth will definitely get affected in a negative way.

Is Investing in pound Safe?

Pound's rise against the Euro has come about mainly in view of the elections in Germany, which has resulted in a drop in the Euro levels. Investors, across the globe, are concerned about the uncertainty/risks that a shift in Germany's politics would bring about for investors. They're also assuming that this would further impact Euro's strength and upset it further. According to financial analysts and experts, Euro might lose its strength and become weaker.

GBP/EUR
GBP rise against EUR (currexy.com)

It must be noted that the Euro is experiencing a lot of pressure ever since Angela Merkel’s party was declared winner recently. As a result, Merkel’s party will now be heading Germany. This has certainly uplifted the sentiments of investors who were planning to exchange Euros for their British pounds. As on the 27th of September, the sterling has gained significant strength against the Euro in the market. The pair reached the 1.14 levels to hit a ten week high position. In fact, in the past couple of weeks, the pair has risen by more than six percent, which has only encouraged more and more investors to exchange pounds for Euros.

With the elections due in Spain, the European Union may further face some amount of tension, which would only benefit the pound, as it would continue its climb upwards. Additionally, the United Kingdom would be releasing its Gross Domestic Production data in the next couple of days, which would only boost the currency further if the figures are higher than expectations. Aside to the above upcoming economic and political events, the Pound will gain further momentum, in view of the Bank of England’s recent announcements regarding new currency notes. It must be noted that the Governor of Bank of England had introduced new polymer based £10 note in the month of September in 2017. The Governor also pointed out that the new notes were cleaner, safer and stronger and capable of resisting dust, wear and tear. The Bank had earlier launched Polymer based £5 note in the month of September in 2016 and will also be introducing new £20 Polymer notes in 2020, followed by new Polymer based £50 note, the dates for which are yet to be finalized by the banking authorities.

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