When it comes to pound, the first thing that comes to mind is undoubtedly one of the most "value" currencies in the world. But in fact, pound has been on a downward trend in the past 150 years - 1 pound in 1864 is worth US$9.97, but is now only US$1.23.
After many events, the outer edges are ups and downs.
htmlOn September 24, the US dollar index, which measures the US dollar against a basket of currencies, rose 0.72%, to the 99 high; overnight, gold fell sharply by $29 per ounce.
data comes from wind
In recent months, the dollar has been firm as investors are attracted by the relatively high yields of the US dollar and the strong momentum of the US economy. But on the other side of the ocean, euros and pounds became a pair of brothers in distress.
We are in
. The trend of the pound is also shaky because of the progress of Brexit, an important source of uncertainty in Europe. As the current Brexit deadline (October 31, 2019) gradually approaches, Brexit may still be the "gray rhino" of huge fluctuations in the financial market.
Brexit uncertainty is high, the UK's financial services industry has begun to move out significantly, and the UK's current global financial position may be significantly weakened as a result. The pound is under pressure as a result.
(Source: Wind)
When it comes to pound, the first thing that comes to mind is that it is undoubtedly one of the most "value" currencies in the world. But in fact, pound has been on a downward trend in the past 150 years - in 1864, 1 pound was worth US$9.97, but now it is only US$1.23.
pound trend is known as the "British National Destiny Index". Throughout history, when the pound depreciation is surging, it is often the time when the UK's international voice is reduced.
This time, the pound stood at the crossroads of history again.
1 "Brexit" in the past six years
"Brexit" has always been the main theme of the exchange rate trend of the British pound against the US dollar in recent years. The pound exchange rate has been hit hard throughout the Brexit process.
(Source: Wind)
- On January 23, 2013 (local time, the same below), then- British Prime Minister Cameron mentioned the "Brexit" referendum for the first time. The pound sterling exchange rate against the US dollar began to fluctuate and decline, with a decline of 5.94% during the downward period from January 23 to March 12.
- On May 28, 2015, the British government submitted and announced a bill on the "Brexit Referendum" to House of Commons, and promised to hold a vote before the end of 2017. After the release of the "Brexit referendum", the pound exchange rate against the US dollar continued to decline until it fell to its lowest level in the past month on June 1, 2015.
- On March 16, 2017, Queen Elizabeth II of the United Kingdom approved the Brexit bill, authorizing the then British Prime Minister Theresa May to officially launch the Brexit procedure. The pound sterling exchange rate against the US dollar continued to rise, with a cumulative increase of 2.16% in the eight trading days from March 16, 2017 to March 27, 2017.
- On June 26, 2018, Queen Elizabeth II of the United Kingdom approved the "Brexit" bill of British Prime Minister Theresa May , officially allowing the UK to leave the EU. On July 12, 2018, the UK released the "Brexit" white paper. The pound exchange rate against the US dollar was boosted and showed a continuous upward trend.
- On March 12, 2019, the British House of Commons voted on the draft Brexit agreement, and finally rejected the draft with 242 votes in favor and 391 votes against. On that day, the pound sterling exchange rate fell 0.60% against the US dollar, but after the news came out, on March 13, the pound sterling exchange rate rose 2.03%, reaching a high of 1.3381 during the session, hitting a high of this year.
Market analysts pointed out that the reason why the UK's "Brexit" situation affects the trend of the pound is because whether the UK's "soft Brexit" or " hard Brexit " will have a great impact on the UK economy.
"Soft Brexit" has little impact on the pound, and may also be more beneficial to the UK. This means that the UK can still maintain close ties with the EU in some way and participate in the EU single market. This minimizes interference to trade, supply chains and businesses.
In this case, the British pound is less affected by "Brexit", and its price comparison with major international currencies such as the US dollar, euro, Japanese yen and RMB will not fluctuate too much.
"Hard Brexit" will cause a sharp drop in the pound. This means that the UK has waived its membership in the EU single market and no longer has the right to trade freely with its European partners without tariff restrictions. Imports from EU countries will likely become expensive and consumption expenditures will increase significantly.
So at this time, the pound had depreciated to a considerable extent, and the voice of "buying the bottom pound" began to appear.
2, "self-decreasing value" 52 years ago
52 years ago, the British pound also experienced a wave of depreciation.
On November 19, 1967, British Prime Minister Harold Wilson announced that the pound would automatically depreciate by 14%, and the exchange rate against the US dollar dropped from 2.8 to 2.4. In 2017, Time magazine reviewed the most important historical moments in the world every week before the 50th anniversary. The 47th week was selected for the UK to automatically depreciate the pound.
52 years ago, there are two main reasons for the active depreciation of .
First of all, the economic development is sluggish. After World War II, Britain's production capacity began to lag behind other developed countries. From 1960 to 1966, the production capacity in the UK increased by only 18%, while the production capacity in West Germany and Italy increased by 29% and 40% respectively during the same period. Low production capacity makes the UK lose its advantage in international trade. When imports exceed exports, more people sell pounds than buyers.
Secondly, the difficulties in the UK at that time also included the crisis in the employment market. By mid-1967, the unemployed population soared from 280,000 to 540,000. Poor economic data has caused investors to sell out pounds in large quantities.
Under huge selling pressure, in order to maintain the exchange rate peg, the British government had to pay out of its own pocket to buy pounds. After exhausting foreign exchange and gold reserves, it was also heavily in debt due to borrowing from International Monetary Fund (IMF) and central banks of various countries.
However, ideals are full, but reality is skinny. The depreciation of the pound has failed to bring miracles to the British economy.
On the one hand, British exporters also need to use imported raw materials, and the depreciation of the pound also caused an increase in costs; on the other hand, the global economy was weak that year, and the third Middle East war caused oil prices to soar, and bank interest rates were not low (6.5%). In this environment, exporters deposited more profits earned into banks rather than reinvesting as the government wished to promote production capacity. What the UK did not expect was that the depreciation of the pound also led to an increase in the cost of living for the British people who rely too much on imports. The inflation in the UK soared from 2.2% in 1967, and by 1971 it had reached 9.5%.
Since then, the pound and even Britain have almost never recovered. Later, it has experienced an economic crisis and frequent workers' strikes. It was not until Mrs. Thatcher came to power that she regained her strength in the "financial explosion".
3 Next step, how to go about the pound?
In addition to the high uncertainty of Brexit, the performance of the UK economy is also worrying. In August, the UK's comprehensive PMI was 47.40. According to the results of the PMI survey, in August, the euro zone except for France's PMI, all other countries ranked at the bottom.
Brexit-related concerns have increased, suppressing corporate and consumer spending to a certain extent. In August, business activities in the UK service industry almost stagnated. The UK service industry has so far been the worst since 2008, with concerns and weak performances in transportation, financial services, hotels and restaurants and B2B business activities.
Some people believe that although the current decline in the UK economy is still moderate, due to the uncertainty of Brexit and the current political situation, companies' expectations for the prospects are more pessimistic, and the economic development situation may further deteriorate by the autumn. The overall employment growth rate is also close to stagnation due to the decrease in new orders and slowdown in corporate employment.
During the Brexit process, the British Supreme Court ruled that British Prime Minister Johnson's suspension of parliament was illegal and invalid, which to a certain extent brought some hope to investors, which is believed to reduce the possibility of Britain's no-deal Brexit.
But some market participants believe that will drag down the UK economy in the short term after Brexit, but may be a positive for the long term. has escaped many restrictions, such as the short-term depreciation after the pound left the European Monetary Union in 1992, but the UK's economy has been recovering compared with Germany since then.
And the eldest and second fights, it is a good thing for the bystanders no matter how you look at it.
These recent events have deepened the uncertainty of the pound's trend.
In any case, the resumption of parliament is imminent, the deadline for Brexit on October 31 is getting closer, and the exciting performance of the pound is about to be staged.
