According to a recent warning from Bank of America (BoA), the British currency 'Pound' is facing a crisis which can be compared to what's happening in the emerging markets.
Although the current situation for GBP is not as bad as some doomsday scenarios, the increased politicisation in the policies of the UK will negatively affect the GBP.
Experts believe that the UK policies are changing as the Bank of England is becoming less transparent and difficult to decipher. For starters, they failed to even acknowledge that an event such as Brexit badly affected the supply side. In fact, it sends a signal that the BoE is getting weak and losing control of its powers.
Central Bank Is Losing Credibility
For any currency, one of its main life-blood is the credibility of its central bank. However, any political interference in the policies of the central bank can badly affect that credibility. That's one of the reasons why the UK is showing the same conditions as if it is an emerging market.
In the past, similar comparisons were made between the currencies of emerging markets and the UK Pound. Especially when the UK was trying to figure out Brexit, the issues were raised several times.
Experts believe that GBP is bearish for the rest of 2022 and may even continue to do so in the near future.
If the current situation continues, there is a possibility that the UK currency could face something of an existential crisis. I mean, what's more, alarming than being compared with currencies from the emerging markets?
The research from BoA suggests that the outlook for the Pound is grim, and it is no longer a respected member of the foreign exchange markets.
Just this year, Pound Sterling is already down by 6.6% when checked in dollar terms. As a result, it has joined the ranks of other worstPoundorms in the major currencies category.