The worst of the pound's post-Brexit crash may be over

It has been a chaotic few days in the currency markets, and the British pound has been taking the brunt of the pain.

One of the most immediate market casualties of the UK’s vote to leave the European Union was the value of the pound, which at one point fell over 10% against the US dollar to well below $1.33, a 31-year low. Friday marked the worst single-day drop ever for the currency.

On Tuesday, however, the pound has started to bounce back a little, and around 8:15 a.m. BST (3:15 a.m. ET) is higher against the dollar on the day to trade at $1.3296, a gain of around 0.5% from the close on Monday. Here is how sterling looks so far on Tuesday:

Obviously, the pound is still severely depressed, and continues to trade at lows not seen since then 1980s, but it does now seem to have stopped the seemingly inexorable fall it has been experiencing over the past couple of days since the UK’s Brexit vote. This rebound, however minor, will give traders and holidaymakers alike hope that the worst of the pound’s crash may now be over.

According to Mike van Dulken of Accendo Markets, the pound has “bounced, strengthening for the first time since Friday’s surprise referendum result on hopes policymakers are working to limit the economic fallout.”

Whether or not the pound will strengthen from its current position, or continue to fall is unclear. Although numerous banks have predicted that the eventual settling point for sterling could be as low as $1.20-$1.25, a drop of between 6 and 9% from the pound’s current level.

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