GBP/USD: Limits to devaluation policies – SocGen

Kit Juckes, Research Analyst at Societe Generale, suggests that there are limits to how far policymakers can drive down a currency, especially in a world dogged by disinflation.

Key Quotes

“Using the example of how much the yen weakened under Abenomics as a template for the extent that sterling could fall implies GBP/USD at a low of 1.20. A messy Brexit could push cable to 1.15, but that would be the worst-case scenario. While capital inflows have easily covered the UK's large current account deficit, the former can be volatile. Sterling weakness will be a necessary support for the UK economy.”