Will the Pound Get Stronger Against the Dollar Given the Impending 2020 Recession

Will the pound get stronger against the dollar given a recession, and particularly in the case of the 2020 recession. For those reading this that are foreign currency exchange gurus, if the pound gets stronger against the dollar, it is unfavorable for those that are currently holding British currency, or who are exporting in selling goods and being paid in British pounds. To give you an example of this, if I’m an exporter, exporting blueberries to Great Britain, and I’m expecting to be paid in British pounds. If the US dollar takes a dive against the British pound, when I’m paid in my British pounds, it will be able to convert to more US dollars per each pound of currency. This is why it is favorable to exporters, when people on CNBC and Bloomberg, say things like the Jan just took a dive against the dollar, or the British pounds took a dive against the dollar. This is also why foreign currency options have become extremely popular among importers and exporters. They can buy foreign exchange currency options, that hedge their risk, depending on what direction to foreign currency goes in. The following blog post will walk through how the British Pound will likely stay put against the US dollar for years to come, read on or subscribe to our blog for more details and information.

Will the Pound Get Stronger Against the Dollar This Year? Most Likely Not

 One example of this, is in the case of British pound calls, and British pound puts. If you are an exporter in the United States, and are selling goods to great Britain, you will want the US dollar to decline against the British pound, and that it will enable you to have more money when you eventually are paid in the foreign currency and convert it back to US dollars. To hedge against risk, and potential he make a greater profit, since there are no options against the US dollar, but there are options against nearly every single foreign currency out there, British exporters, or rather I should say exporters that are currently in the United States, will do something like purchase British pound ports, in the case that the US dollar takes a dive against  it’s self, and in the case that British pounds go down in the US dollar rises. If the US dollar rises, in British pounds go down, this would be an unfavorable situation for the exporter, however if they had purchased British pound puts, the risk would be hedged, and they may actually gain as a result of the foreign currency exchanging misfortune.

Why I Think the Pound Will Not Get Stronger Against the US Dollar

Overall, foreign currency exchange is extremely interesting, but it’s also extremely difficult to get through your head when you’re first learning the concept. I first fully understood this concept when I was taking corporate finance as a young freshman in college, however the import and export side of the business never fully sunk in until I studied for the series 7 license. Within the Series 7 manual, there is an entire chapter dedicated to options, and most notably foreign currency options, and how they can be used to help importers and exporters either hedge risk, or increase leverage. Overall it is an extremely interesting topic, it is very cool to know, because if you’re at a table with people that do not understand finance, you will sound extremely smart by comparison.

Final Thoughts on the British Pound vs the US Dollar, Two Very Different Gems

In summarizing this blog post, if the British economy somehow starts miraculously doing far better than the US economy, and their GDP growth numbers turn out to be strongly positive while the US economy numbers are strongly negative, then yes, it is possible that the US dollar could take a strong dive against the UK British pound. With this in mind, the British economy is taking a bad hit, so I just don’t see this happening in the near future. Think the dollar will take a dive against the pound? Comment down below with your thoughts and opinions, and we’ll get back to you ASAP.

Cheers!

*Inflation Hedging.com

Sources:

https://www.bankrate.com/banking/cds/cd-rates/

https://money.cnn.com/data/markets/

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