British Pound collapses 6% to below USD 1.19: How low can it go?

Wild action in early Friday trading in the British Pound.

After seeing the Cable trade slowly deteriorate in recent weeks – accelerated earlier this week following new British PM Theresa May’s announcement of a formal start to the Brexit process – the GBPUSD pair saw a 6% spike downward at the start of Asian trading Friday, dipping from the 1.27 range to as low as 1.1841. The under-1.19 level marks the Pound’s lowest value relative to the US Dollar in more than 31 years, dating back to May 1985, in fact.

As of the time of writing (approximately 1:30am BST), the Pound had recovered most of that ground, to around 1.2450.

Many European traders long the Pound may wake up Friday to learn that they were stopped out of their trades on the way down.

The current direction of the Pound is very reminiscent of the late 2015 / early 2016 collapse of the Canadian Dollar, which dropped rapidly to below 69 cents US, from above par with the USD not long before. Very different circumstances and cause (falling oil prices), but traders were left with the same question:

How low will it go?

There doesn’t seem to be anything on the horizon to make traders bullish on the Pound. And there sure is a lot of uncertainty still hovering around Brexit, and what will actually happen in the coming weeks and months – and beyond.

One thing does seem sure – a very nervous market will see some more similar ups and downs in GBP pairs. GBP traders – better be ready for lots more volatility.



GBPUSD chart Thursday to early Friday. Source: Plus500.

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