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The travails of Great Britain build to a Climax

Oct 25th, 2016

UK bankers prepare for exodus from London and the value of the British Pound continues to drop alarmingly because all indications now point to a HARD BREXIT. If the bankers exit, it presents a headache for Chancellor of the Exchequer Philip Hammond just as he is planning to ease the budget to support the economy.

At stake is some of the $81B paid by financial services in taxes in 2014-15, whilst foreign products purchased in the UK start to increase in price, such as Microsoft (by 22%).

All this as the Government faces a constitutional crisis because of reluctance by Scotland, Wales, and Northern Ireland to leave the EU. Read the full Bloomberg article on the bankers exodus from London by clicking here.


These are many of the causes of the Pound Sterling dropping alarmingly in value. Observe the GBP/USD currency pair in the weekly chart below.


The Pound dropped down to a point in early 1993 from where it began to form a gigantic Head and Shoulders pattern stretching over 24 years, to finally breach the neckline at 135 in Oct 2016. This caused the ‘Flash Crash’ trading activity which saw the Pound drop further to 122.

A hard Brexit will no doubt reduce the value of the Pound further in the next year or so, but in accordance with basic technical analysis this drop will approximate the height of the ‘Head’ which in accordance with the semi-log scale on the Y axis at right will reduce the Pound to below parity with the US$. This is estimated to reach 0.60 in the next 8 years: In other words it will only take US60 cents to buy 1 Pound Stirling.

This would represent the lowest value of the Pound relative to the US dollar in history: From a post-Bretton Woods high of 2.60 in 1972 to the target of 0.60, the pound will have lost 77% versus the US dollar in less than two generations.

The US Dollar itself is no stable store of value either, as it has already lost 75% of its value relative to gold during the last 45 years.

Surely the last ‘death rattle’ of the UK as we know it.

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