Original article – 3 October 2016.
So there we go. After selective reporting by the media, only saying anything when the GBP goes up against the US Dollar (USD), today it has hit a new 31-year low.
As I write this, it stands at $1.286 – and it’s still trending down. The BBC has been careful not to mention this new record, instead rattling on about the FTSE – which, incidentally, is only increasing because the GBP is falling, since many FTSE listed companies who sell in $s can report better figures in £s, thus encouraging share dealing.
This is what the mere stench of Brexit has done. Just wait until we start to taste it as well!
It fell to $1.272 at the end of 4 October – 14.2% below what it was at before the Referendum.
On 6 October it was at $1.260 – that’s over 15% below its pre-Referendum value.
On the morning of 7 October the GBP appeared to enter freefall again. Laughingly, this is being blamed on an “Asian flash crash”, as the UK media frantically seeks to blame it on someone outside the UK, and on events which are non-Brexit related. They even declared that the GBP “recovered immediately”.
Let’s get something straight. It didn’t “recover”. It momentarily dropped to about $1.14 and then rose again – but not to the original value. Throughout the day it only recovered half of what it lost in the “flash”, and then progressively lost half of that gain again. It is barely holding $1.24, and even the slight rise at the close of trading was due to the USD weakening on disappointing unemployment figures (it is absolutely not because the GBP strengthened). It was at $1.260 yesterday, $1.272 two days before that, and $1.286 on 3 October. It has therefore lost almost 5 cents – nearly 4% of its value – in consecutive stages in around four days. Whatever happened last night was – and remains – real.
Performance against the EUR is almost identical.
There is only one reason this happened. And that reason is Brexit.
Late afternoon of 10 October and the Forex rate is below $1.24. The media – particularly the BBC – is still trying to talk things up and avoid the obvious. They point out that many airports are now offering less than €1 to the GBP, adding that:
You can find better currency rates almost anywhere other than at an airport.
Well, yes. M&S is offering €1.08 – and so is Asda. John Lewis is offering €1.09. Tesco is offering €1.10. There is a transaction fee which pulls the actual rate down by a few cents in each case. For all practical purposes, the rate is €1.08, and airports ALWAYS give lower rates. They always have.
The fact is that the GBP has fallen so much that the €1 threshold is painfully apparent.
I’m dying to see them talk this one up. By the end of 11 October (the first trading day after the weekend) it had hit as low as $1.21 and finished at around $1.22. Early on 12 October it has risen to almost £1.23.
However, since its highest level post-referendum, it has dropped by the virtually the same number of cents that it lost the day after the referendum! In other words, it lost 14 cents as a direct result of the referendum, and it has fallen 13 cents since early September. It is around 26 cents lower than it was the day before the referendum (or nearly 18% down).
But I bet you they start talking about how it is 2% up on yesterday’s low.