Since 2016, the pound’s high volatility and liquidity have shown more resemblance to one of the stronger Emerging Market currencies like the Mexican Peso than the developed G10 currency it is supposed to be. Due to the never-ending Brexit saga the pound has been moving as if it were on a roller-coaster and as you’d expect not many investors are willing to take a long-term view on country with an unstable exchange rate. Leaving the UK economy’s growth rate shrinking by 2% since 2016. On a more positive note just like other EM currencies like TRY and ZAR the volatility was great for banks’ traders, especially options traders. This is because as a trader increased volatility in the markets increases the probability of your option paying off. In the banking world we call this (spot moving past your strike price).

This pound’s performance is interesting because with the UK’s vast network and relationships across the globe it is inevitable that the tiny island will retain its stance as one of the most powerful countries. But the limiting factor here is Brexit.  Although, the corona-crisis has thrown a spanner in the works it is a matter of time before Brexit is finalized, investors will start to the return to the UK and you will see a lot more development such as flats being built, increased gentrification and new jobs emerging from new technologies. So, although the UK is temporarily not a good investment it is one to keep your eye on in the next few years.

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