Remember that whole PESTLE thing that I’d mentioned before? Well, PESTLE has again come to mind as pundits from all over the world of finance have united in their pessimism of the British sterling’s short-term future, predicting the pound’s inevitable plummet against the U.S. dollar and Chinese yen as a result of Brexit.
I can only imagine that the convergence of political and economic factors (waves of top talent being forced to leave Britain, investments being withdrawn from the country and a corresponding increase in sovereign debt, and the exit fee that the country must pay to leave the EU) have caused capital market investors to determine the resultant currency risk to be substantial enough to cause a significant devaluation of the pound. In fact, some predictions are estimating that the pound’s value relative to the dollar will bottom out at about $1.05. It is also expected to depreciate sharply against the euro (big surprise there).
I’m curious as to what will then happen in the aftermath. Will Britain take a cautious approach to rebuilding its economy? Will it float a sovereign Eurobond? Will the availability of social benefit programs be cut, with the money saved reinvested to foster growth? It’s obviously a very curious situation, though I suspect that it’s more likely extremely nerve wrecking for EU nationals living in the UK.
The opportunist in me would somehow be inclined to exploit arbitrage opportunities caused by the currency devaluation. I’m not sure I’d be risk-averse enough to invest heavily there, but I would certainly take advantage of the relative cost of education at top tier universities before the pound climbs again (as it inevitably must). Either way, whether due to a mass exodus of EU nationals or consumer arbitrage, I suspect there will be scenes like this around Britain by summer: