The joke among currency traders is that GBP — their acronym for the pound — now stands for the Great British Peso, an allusion to the UK’s burgeoning notoriety as an unpredictable emerging market. Corporate treasurers and investors have to get their laughs somewhere, as dealing with the currency has become baffling. Sterling lost 20 percent of its valuation in the weeks after the EU referendum in 2016, but since the start of this year, the sudden declines have ceased. The currency is trading less than 1 percent away from levels it struck against the euro and the dollar two months ago, despite the turbulent political backdrop that has involved three rejections of prime minister Theresa May’s Brexit deal and two delays to the withdrawal deadline.
Through it all, the currency has scarcely budged from $1.31 against the dollar since mid-February. The latest significant outcome, a six-month suspension to the UK’s withdrawal, provoked only an insignificant ripple in the exchange rate, with investors still unclear what deal there will be, when, and what the economic impact of this long-running political drama might be. Yet the explicit stability in the pound masks an uneasy path during the trading day, with the currency often flickering higher and lower for minutes or hours, as each new headline in the tortured Brexit process develops.
Adding up every intra-day shift up and down over half-hour periods, sterling has moved a stunning 121 percent against the dollar and the euro since January. That is double the euro’s cumulative ups and downs against the dollar and the dollar against the yen, which amounted to 65 and 66 percent over the same period.