Thread: Reasons behind the fall of the pound sterling

I was analyzing the main catalysts that have caused the recent fall of the pound... and these are the ones that occurred to me. First, many investors thought that the United Kingdom was going to normalize its monetary policy at the same pace as the Fed. That did not happen... which caused capital to move from the pound to the dollar. Second, the fear of Brexit has reappeared, even in small doses... and that has also pushed a little bit into the market. Third, several influential financial analysts have been insisting that the pound is overvalued, and that has also moved the waters. The pound has gone down hard enough for only these three factors to explain it. Does anyone have in mind any other logical catalyst that could have pushed retail or institutional investors to move tabs? I mean objective reasons, beyond price feedback, which always commands. "We don't have to fear a bubble... until it starts to explode."

The factors you mentioned are already more than enough to justify the fall... if you hoc legee scis nimium eruditionis habes

Yes, those three points may be enough, but the fall has been quite aggressive in a short time. I wonder if there’s anything else behind the scenes we’re not seeing.

The British government is more divided than ever, and that does not exactly inspire confidence in the markets.

What about macro data? Latest reports of GDP, inflation and consumption have been one disappointment after another. You don’t need to be a genius to predict the reaction.

Did anyone think that the pound was going to stay strong with all the uncertainty in Europe and the UK at the same time?

Okay, so can we say it's more a sum of negative factors than a single, clear cause?

Totally. This is like a pressure cooker: every factor adds pressure and suddenly... boom! Exaggerated market reaction.

And let's not forget the appetite for the dollar lately. With the Fed climbing guys and the dollar in tank mode, everything else looks like wet paper.

The hedge funds have also begun to cut exposure to the pound. When they leave, the fall accelerates itself.