How Low Can the Pound Go?

The British pound has fallen sharply after Britain’s official referendum, Brexit, in June. The UK’s hard Brexit has become clear.  The pound again plummeted lower, and fell to 1.27 US dollars, a record low since 1985.

The pound may fall to $ 1.10, or even fall to parity against the dollar.  Can it happen?  Maybe.  However, so many so-called experts were calling for Euro Dollar parity as well several months ago.  It was never materialized.  British pound has set the record low against the Dollar.  However, this may be a good opportunity to buy.  There are two reasons.

First, the pound weakness helps exports. Indeed, the UK will leave Europe.  Some exporters will face tariffs.  That is a direct impact, but the pound’s dramatic depreciation should be enough to make up for the impact. Therefore, regardless of what harm after the British broke off Europe, ultimately, the benefits would be far more than the damages in the end.

Second, after the referendum, the market reaction was far better than expected.  FTSE 100 just set the record high recently.  How can the stock market set the record high if Brexit is really that detrimental?  Experts have continued to overestimate the importance of the EU on the UK’s trade and economic growth. In fact, there is little evidence to show that the EU has a significant impact on the UK.

Analysts expect the pound will continue to be under pressure until March next year.   The United Kingdom will trigger Article 50 and start the formal and legal process of leaving the EU.  The pound will not likely to go lower once Article 50 is triggered.  When the pound rebounds, it may rise rapidly and fiercely.  If you are a bargain hunter, it may be a good time to begin to monitor the pound prices for the next few months and plan for the buying opportunities.

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