How to make money on a pound due to Brexit?

For more than three years, the whole world has been following the drama called Brexit, and at the same time the behaviour of the pound sterling exchange rate, which still remains one of the world's reserve currencies. It is curious that having collapsed immediately after the referendum on the UK leaving the European Union in June 2016, the British currency continued to decline against the US dollar until mid-January 2017, when the final depreciation approached 20%.

The decline was generally justified - the prospects for the economy were not clear, given the very dense financial, industrial and business links of the island with the mainland. However, gradually the configuration of the UK exit from the European Union began to emerge, and it was assumed that this exit would still be ordered.

In the second quarter of 2018, the pound won back almost all the losses of 2016, returning to the level of $1.43 per pound, but then resumed its decline, heading towards values of about $1.25 per pound. However, this decrease was largely due to the dynamics of the US dollar, which was actively strengthened in 2018, however, the pound fell to the European currency. Since the beginning of 2019, the positive has returned - it seemed that the agreement on withdrawal was almost agreed, and the economy still felt good. But this time, the situation inside the British parliament worsened - Prime Minister Theresa May did not manage to agree on an exit plan, and the UK’s unorganized withdrawal from the European Union was again discussed.

The UK has received a delay so far in leaving the EU until the end of October of this year. Regardless of what the composition of the government will be in the country by this time, they are more likely to delay the delay by a few more months, and the government and the parliament, following public opinion, will continue consultations with the EU to finally agree on a “soft divorce".

The pound sterling fell sharply in recent weeks and is at local minimum ($1.26-1.27 per pound), which are not too far from the extremely low values of the end of 2016 - the beginning of 2017 ($1.20–1.21 per pound ). At the same time, such a weakness is again due to the uncertainty around the Brexit configuration The economy feels good: nominal GDP in the first quarter grew by 1.8% year on year; production of goods, according to March data, added 2.6% year on year; trade deficit is reduced; the unemployment rate is at around 3.9% (multi-year low); household incomes grow at a rate of more than 3% per annum. According to various estimates, the fair value of the pound sterling against the dollar is 8-12% higher than the current rate. At the same time, the market ignores the talk that has begun on holding a second referendum, which may cancel the results of the first.

In this case, the United Kingdom, in general, can retain membership in the European Union. According to public opinion polls, the majority of citizens of Albion are now exactly what they want. Thus, the rate on the growth of the pound against the dollar and the euro can bring a good profit with a very high probability. At the same time, the scale of the possible reduction of this currency in the event of increased political friction within the country seems to be very limited.

The information above cannot be considered as an investment advice and past results do not indicate future performance.

**Investors should have experience and understand the risks of losing all the initial investment.

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