Next year the pound could drop
Nov 28 (Reuters) -Next year the pound may drop as a long-term downtrend resumes and sterling seeks out a base for a range where the peak has been established this year above $1.3000.
Since the global financial crisis in 2008 the pound has been in decline, meeting a key downside objective in the wake of Brexit at $1.1322 in 2016, and then slumping below that point in 2022 to reach $1.0382.
The surge from that low subsequently failed close to $1.3421, which was crucial as, despite its extent, the rise now looks to be a big correction, not the change of trend that had seemed possible.
The drop to $1.2484 that has unfolded in just two months since then has happened while traders have been betting on a bigger rise and investors are holding pounds as carry trades. Their lack of preparation for a drop will exacerbate its extent during a period when the UK interest rate is expected to fall.
The ranges, which dropped sharply from $1.40-1.70 toward $1.15-1.45 after Brexit, look set to drop again, perhaps toward $1.05-1.35. But with the long-term objective some way below parity at $0.9290, there's reason to hedge for an even lower pound.
Golden opportunity to hedge the risk that the pound drops nL1N3MR0AS
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GBPUSD 50-year view https://tmsnrt.rs/4iaE1CF
2022-2024 rally stops at crucial point https://tmsnrt.rs/4i6IvdE
GBPUSD long-term objective https://tmsnrt.rs/4fJp7BV
(Jeremy Boulton is a Reuters market analyst. The views expressed are his own)
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