The 2017 Drop in GBP Against Other Currencies Post-Brexit
Since the Brexit referendum, the British Pound Sterling (GBP) has seen significant fluctuations, often dropping against the US Dollar and other major currencies. On January 16, 2017, we observed another noteworthy decline in the GBP due to various political and economic factors. This article explores the reasons behind this drop and its implications for the UK economy.
The Post-Brexit Reality of the British Pound
Contrary to claims suggesting the British pound has been undervalued since the EU exit, the truth is more nuanced. Prior to the Brexit referendum, the pound was valued at around ￡1.22 against the US dollar. However, following the Brexit vote, the pound fell to a low of ￡1.18. Over the subsequent years, the currency has recovered to a level of ￡1.31, still well below its pre-referendum value.
Incompetence or Strategic Asset Sales?
The recent drop in the value of the GBP is often attributed to the government's perceived incompetence or a strategic decision to sell off the UK's assets and transfer them to offshore accounts. Critics argue that it is unclear whether the government is working in the best interests of the UK. The government maintain that exiting the EU is necessary, but the economic consequences are clear and concerning.
The Impact of Brexit on GBP
The impact of Brexit on the GBP cannot be understated. The UK's decision to leave the European Union has created an environment of uncertainty that has affected the currency's value. The European Union (EU) has traditionally been a stable economic partner for the UK, and the prospect of a hard Brexit has made investors wary. The pound's value has dropped significantly whenever the possibility of a hard Brexit has increased.
Recent Events Leading to the Drop
On January 16, 2017, the pound experienced a drop due to further hints from the UK government about the likelihood of exiting the single market. David Davis and Theresa May, key figures in the government, commented on the potential implications of leaving the single market, causing market uncertainty. Theresa May has expressed a desire to leave the jurisdiction of the European Court of Justice (ECJ) and limit EU migration, possibly allowing only those in the finance industry to stay.
David Davis, the Secretary of State for Exiting the European Union, mentioned that the UK may pursue trade deals outside of the customs union. This statement has contributed to the drop in the pound, as it suggests a possible hard Brexit.
Market Reactions and Future Predictions
Market reactions to any indication of a hard Brexit have been consistently negative for the GBP. Since January 2016, the pound has experienced a continuous decline whenever the potential for a hard Brexit increased. Following the Brexit referendum, the pound fell sharply, and even when a softer Brexit seemed possible, there was still a decline. The Conservative Party conference, which included a hard Brexit message, led to further drops.
Recently, May gave an interview indicating a strong desire for a hard Brexit, resulting in another drop. Over the weekend, several statements, including one from Chancellor Philip Hammond, suggested a hard exit from the EU. Looking forward, May's speech on Tuesday, January 17, 2017, is expected to cause another drop in the pound. Experts predict that the pound could fall to $1.10 in the coming weeks if the hard Brexit scenario materializes.
Conclusion
The drop in the British Pound Sterling against other currencies, particularly the US Dollar, is a result of ongoing political and economic uncertainty following the Brexit referendum. While the immediate causes of the 2017 drop are clear, the long-term implications for the UK economy remain uncertain. As the UK moves forward with its exit from the EU, the value of the pound will likely continue to be influenced by market perceptions of the UK's future economic prospects.