The pound has taken a battering ever since Britain voted to leave the European Union on June 23 — and it is only going to get worse.
When David Mercer, CEO of a UK-based FX platform LMAX Exchange, spoke to Business Insider, he told us that we should not be fooled by the seeming stabilisation of the pound against the US dollar at around $1.33 — the worst is yet to come.
“I thought the pound would fall as low as $1.20 against the US dollar after the Brexit vote and while it didn’t fall as low as that, it did trade in the $1.20 to $1.30 region for a bit,” said Mercer of LMAX Exchange, which trades $10 billion (£7.5 billion) in currency daily.
“At the moment the pound is trading $1.33 against the US dollar and the economy is looking OK — we’ve had good growth across a number of sectors — but it looks like the markets, everyone is ignoring potential bad news and looking and dealing with what’s happening right now, today. So, in the long term, when the cold, hard reality of Brexit really hits Britain, you will see the pound against the dollar trade in the $1.20s and potentially as low as $1.15.”
Sterling fell to 31-year lows against the US dollar in the immediate aftermath of the Brexit vote but has recovered from its lowest point, which was at $1.288.
Mercer’s comments fall in line with a number of analysts’ forecasts.
HSBC argued last month that sterling will fall to $1.10 and reach parity with the euro by the end of 2017. Other predictions about the pound’s medium term outlook range from $1.20 at Goldman Sachs and $1.15 from Deutsche Bank , all the way to $1, a prediction made by former PIMCO executive Mohammed El-Erian.
Don’t forget to check out the full interview with David Mercer, CEO of LMAX Exchange on September 5.