GBP has depreciated in the 7 months up to February substantially. This was most conspicuous on the GBP/JPY pair which
was down by over 20% and GBP/USD pair which has dropped by over 12% and reached a 7 year low at 1.3835. Afterwards
the GBP has bounced back up to around 161 and 1.44 and is currently trading at around 159 and 1.41 respectively.
The two main factors determining it’s further trend direction for the upcoming months will be the potential Bank of England’s interest rate decision as well as the referendum taking place on June 23rd and being decisive on whether United Kingdom will stay or leave the EU.
1.1 EU Referendum
The Fitch Ratings agency has issued a report stating that Brexit would “drive short-term disruption and long-term risks” and that the “precise impact would be highly uncertain”.The referendum factor is solely political and unpredictable, although BoE Governor Mark Carney has reassured that additional liquidity will be provided to the banking sector before and after the referendum in order to avoid any potential insolvency problems. However, as the campaign unveils we will probably see many turnarounds in polls and predictions and this wil…