Pegging

There has been much talk about the ‘collapse’ of sterling since the EU referendum and the associated spur to international real estate investors. Certainly, the fall in sterling has been the most observed result of the vote so far. But how dramatic is this? The pound’s position against a strong dollar is the weakest since 1985. Consequently, sterling has also performed poorly against currencies pegged to USD (most Middle Eastern, Hong Kong etc). However, the pound last traded at this level against the euro as recently as summer 2013. And so we can see that those currencies pegged to the euro (most of wider Europe and Africa) do not enjoy such a relative advantage (there being a similar story with some floating currencies such as the Australian dollar). Meanwhile, the Chinese Renminbi, which (officially) decoupled from the dollar last year, has been steadily losing ground against its former peg, which together with a weakened growth outlook is precipitating capital outflows, in part to UK real estate.