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Pound drops to lowest levels in over 30 years

While the Pound/Dollar is currently trying to move back towards 1.30, the pair has experienced a really rough previous 24 hours and dropped sharply overnight to its lowest levels in over 30 years below 1.28.

The reason for the resumption in losses for the British Pound is being attributed to a decline in investor confidence, and shortly followed the headline comments from the Bank of England (BoE) yesterday that there is evidence that the risks identified with a Brexit outcome from the EU referendum are already emerging.

I also feel that investors are moving forward when it comes to pricing in the ongoing uncertainty over who will become the Prime Minister of the United Kingdom once David Cameron steps down in a couple of months, the likelihood of further economic downgrades while the UK negotiates its lengthy exit away from the European Union, and the resurgence in the possibility that Scotland might be tempted to call its own second referendum in the future, as further reasons to explain the ongoing decline in value for the British Pound.

There is overall a great deal of ongoing uncertainty over the UK economy, which is drastically weighing down on the buying sentiment towards the British Pound. With so many different factors basically overwhelmingly weighing on investor sentiment and providing a platform for investors to sell the currency, we are more likely than not going to hit further lows in the Pound/Dollar over upcoming months.

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Jameel Ahmad is vice president of market research at FXTM.

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