Pound Slides Amid Trade War And Falling GDP
America’s trade war with China and a falling GDP in the U.K. is to account for the current slide in the Great British Pound.
Trump’s trade war prompted global worry and its effects on global economic growth. Consequently, widespread “derisking” occurred. “Derisking” is the process of moving assets out of countries highly reliant on inflows of foreign capital. Because Britain has a large current-account deficit, it was affected by global “derisking.”
The sliding pound has also been prompted by the consistent fall in Britain’s GDP. The GDP fell 0.4% in April, with slight improvement in May. Other analysts have claimed that Britain experienced no economic growth during the year’s second quarter.
Additionally, as the race to replace Prime Minister Theresa May progresses, the pound’s slide has been catalyzed by the two contenders’ increasingly supportive language of a Brexit that is not accompanied by an exit deal. The U.K. is expected to leave the EU on October 31st, although a deal has not been set yet.
Lack of stability in regard to an ongoing trade war with global repercussions and falling GDP are supplements to the uncertainty behind Brexit in regard to causes of the falling pound.