The British Pound's weakness harks back to the dark days of the late 1960s

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For a number of weeks, the British Pound has been down in the dumps, performing very weakly against its de facto peers, the Euro and the US Dollar.

As this week's trading sessions begin across Europe, the Pound sits at a stagnant 1.16 against the Euro, and an equally mediocre 1.22 against the US Dollar.

The Pound, which remains the world's strongest fiat currency, has been under the microscope of analysts and investors for a few weeks now, and its dull performance is quite interesting considering that the UK did not suffer the same level of government-enforced lockdowns as mainland Europe or parts of the United States did during 2020 and 2021, and its economic burden is devoid of fueling the enormous debt which some member states of the European Union are saddled with, as the United Kingdom is no longer a member of the European Union.

Inflation is playing a major part in the devaluation of currency across the Western world, so therefore by that logic, all majors apart from the Japanese Yen should be in the same position, however the reality is the absolute opposite. The Yen is at a historic low, and the Euro and US Dollar are doing better than the British Pound.

Some pundits have indicated this morning that political woes as well as economic hurdles in the United Kingdom have created an 'investor flight' toward the US Dollar, however there are similar political woes in Europe and the United States, and the populations of both continents each side of the Atlantic face similar cost of living crises as the one in the United Kingdom.

The 'nothing to see here' approach by the British authorities has draw comparisons with the devaluation of the British Pound in 1967, a crisis for the vast majority of citizens, which was dismissed casually by the prime minister of the time Harold Wilson, who claimed quite outrageously that the pound in people's pockets was unaffected.

One possible explanation for the continued depression of the Pound's value could be the current situation in which the workers unions are once again rearing their heads.

Britain's rail networks were blighted by strike action last week, and at a time during which there has been political uncertainty, militant strike action on a national scale harks back to the industrial disasters of the early 1970s, not long after Prime Minister Wilson dismissed the late 1960s devaluation of the pound.

This year alone, the British Pound has decreased in value by 9%, which is a considerable amount, especially when bearing in mind that the Dollar has also been hit by inflation at a 40 year high in the United States, and the US Government's stance against Russia which has led to the US Dollar losing its status as a de facto settlement currency for raw material commodities such as oil and gas which must now be settled in rubles when being purchased from Russian suppliers.

The volatility of late has even spurred an off-the-cuff remark by Bank of America which has likened the British Pound's behavior to that of an emerging market currency!

Of course, that is hyperbole, and the Euro zone is also in a precarious financial position, with a brewing Italian bond crisis and a central bank even more laggardly than our own to raise rates.

The finger-pointing in Britain is now in full swing, however, and the Bank of England's governor is about to be hauled over the coals by the authorities for apparently not doing enough to predict the levels of inflation that are now being experienced.

This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.

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