Spread betting – forex – how the pound was the world’s worst currency in October

The pound was the world’s worst performing currency in October as concerns about Brexit weighed heavily on demand.

In what was the darkest month for the currency since June, sterling declined 6% against the US dollar over the month to clock up the largest decline out of any tracked by Bloomberg. That places the pound behind the likes of the Colombian peso, Romanian leu and Swedish krona.

The decline was the biggest since it dropped 8% against the US dollar in June. The pound was also 4% lower versus the euro, which was some way short of the more than 7% fall in June.

Sterling has now shed around 20% of its value against the dollar since the June referendum, making it among the worst performing currencies this year.

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Why the pound is down

 

The fall in the pound actually comes against some pretty decent economic numbers for the UK economy. Third quarter GDP growth was 0.5%, which beat expectations for just 0.3% expansion. Whilst below the 0.7% seen in Q1, it was nevertheless a sound performance and an indicator that the UK economy has been pretty resilient in the face of Brexit so far.

But the upbeat performance hasn’t been enough to outweigh the negativity stemming from fears about what a Brexit Britain will look like. Fears of a so-called ‘hard Brexit’ have dominated since the Tory party conference and the pound has been unusually sensitive to political news. Speculation around the future of Bank of England governor Mark Carney has been evidence of the politicised nature of the markets at present.

Meanwhile, S&P recently cast doubt on the pound’s status as a global reserve currency, further piling the pressure on sterling sentiment.

Bank of England

 

Markets are now looking ahead to the Bank of England interest rate decision on Thursday, November 3rd. Having already cut interest rates to a record low 0.25%, a combination of higher inflation and healthy economic data suggests the Bank won’t cut again this time.

Super Thursday will also include the Bank’s inflation forecasts, which will reveal more about what officials make of the recent slide in the pound.