The COVID-19 pandemic took some heat away from the British pound, given Brexit. But Brexit is one of the causes of further weakness for the pound, according to Rokos Capital Management, an alternative investment fund management firm with over $14 billion in AUM (i.e., Assets Under Management).
Other reasons for the bearish outlook invoked by Rokos are the effects of de-globalization and the COVID-19 pandemic.
Are you looking for fast-news, hot-tips and market analysis? Sign-up for the Invezz newsletter, today.
The warning from Rokos is a bit strange, given the latest price action in the FX market. For instance, the GBP/USD exchange rate is well off its lows, as the pair rallied from below 1.04 to over 1.20 in the last two months.
But was this just a US dollar move rather than a GBP one? It seems so if we compare the GBP performance across the FX dashboard in 2022.
The pound is weaker than its peers in 2022
A quick look at the FX dashboard tells us that the British pound is weak across the board. First, the EUR/GBP cross is up +3.46% YTD.
Russia’s invasion of Ukraine weighed on the euro, but if there is one currency that weakened against the euro, it is the British pound.
All other main GBP pairs declined this year. As such, GBP/AUD declined by -3.65%, GBP/CAD by -5.53%, and GBP/CHF by -7.95%.
As for the GBP/USD exchange rate, while up by some 1,500 pips in the last two months, it is still dropped by -10.82% YTD.
Therefore, 2022 was not the year to buy the British pound. Yet, Rokos believes the weakness should persist in the period ahead, warning investors that the worst is yet to come.
Looking to capitalise on rising & falling USD, GBP, EUR rates? Trade forex in minutes with our top-rated broker, eToro.
10/10
68% of retail CFD accounts lose money