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The way I understand economics is that price of the currency represents the strength of one economy against the other, especially in the long term.

Concensus being that Brexit is not going to help British economy, one would expect Pound to drop in value against Euro and U.S Dollar.

However, looking at forex it's the opposite GBP to USD since 2019 in 3 months went from ~1.272 to ~1.318

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Same goes for Euro it went down from ~0.9 to ~0.853

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Which to me is counter-intuitive.

Why is British Pound months before Brexit is going up against both U.S Dollar and the Euro?

Matas Vaitkevicius
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2 Answers2

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The drop in the value of the pound because of Brexit happened in June 2016. All price movements since then are against a baseline price that already takes Brexit into account, and largely reflect markets’ changing views of the likelihood of hard/soft/no Brexit. It’s gone up a bit recently because the chances of ultra-hard (no deal) or hard (May’s deal) Brexit seem to have gone down.

Mike Scott
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You're totally right that really bad economic news should make these numbers go down. But there are two things at play:

  1. Brexit hasn't happened yet.
  2. These trends play out in the long run, but in the short run there are a ton of factors at play.
Icaval
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