The British Pound (GBP) has been struggling for a few years now. Its value has been affected by the Euro zone crisis and its own recession. This weakness of the GBP is making it more difficult for the British people to spend money they have earned abroad.
Lockdowns: The UK government and the Financial services companies in the UK have been restricting the movement of people, goods and capital across the border. They have also been doing this in an effort to reduce the supply of labor in the United Kingdom. If there are fewer people, goods and capital available for sale within the United Kingdom then the price will be higher. There is a huge effect on the value of the British Pound, if a country experiences a sudden labor shortage.
Britain has recently experienced some of the worst riots in many years. There have been demonstrations in many towns and cities throughout England and there are concerns over the future of the United Kingdom. These developments have reduced the amount of disposable income that is available to the British citizens. There is also some speculation that the Euro will not survive the current crisis. The value of the British Pound will drop further if these developments occur.
Latest – Lockdowns, Brexit and Negative Interest Rates
There are other areas where the British Pound has been affected negatively. For example, the Bank of England has begun the process of quantitative easing, which is the pumping of money into the economy. In order to increase the liquidity in the UK’s financial system the Bank of England has increased the size of its balance sheet. The current plan is to increase the size of the balance sheet by a total of sixty billion pounds by the end of this year.
In order to help stimulate the economy the Bank of England has introduced negative interest rates. These rates are set at the rate that the banks charge one another to borrow money. This means that when a bank borrows money from another bank, the rate charged by the bank to the individual borrower is reduced by this amount. This has the effect of reducing the amount of money that an individual has to pay back to the bank. As the bank charges less interest, its profit margins increase.
In addition, the government has announced that it will be withdrawing cash from its nationalised bank account. This cash will come from a fund that was set up in order to help with the payment of debt. in the event that the United Kingdom is forced out of its membership in the European Union.
The Bank of England has also said that it is going to start purchasing British Pound coins. in order to keep the currency stable. The effect this will have on the British Pound will not have a direct effect on the value of the currency but it can cause the price of the British Pound to increase if demand for the Pound increases. Demand for the Pound will not go down all of the sudden, but it will remain unstable until a solution has been found.
Negative Interest Rates: As is the case with many countries that experience financial difficulties, the British government has introduced negative interest rates to try and encourage more spending. In the last few months the interest rate charged on loans and mortgages has increased. The lower the interest rate on loans, mortgages and credit card transactions the more money will be available to the public in the form of income. It has become more important to keep money in the bank, so as to avoid the possibility of the loss of the ability to borrow money in the future.