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The recent data shows a surge in options being taken against the pound, suggesting a lack of confidence in its value. With a billion pounds worth of options betting on the pound breaching the 1.22 level—which it has already crossed—fund managers anticipate continued depreciation. Estimates show that up to 1.8 billion pounds have been wagered on the pound dropping to as low as 1.12 against the dollar.
The Trade Imbalance and Economic Growth
The precarious state of the pound is further exacerbated by the UK’s negative balance of trade. For 11 of the last 12 months, imports have outweighed exports, resulting in a growing trade deficit. Recent figures reveal a widening gap, with the balance of trade deteriorating sharply from -2 billion in August to -3.7 billion in October.