Do you know where the pound is heading?

Keep it brief

  • Growing amounts of political or economic uncertainty, for example, can cause a currency to experience amplified levels of volatility — an environment where investors may see bigger ups and downs than most market participants are used to.
  • Since the referendum was announced in 20151 the British Pound has traded in a much more volatile fashion than expected from a major currency.
  • In this infographic we explore what impact currency volatility can have on investments, and how to reduce currency risk.

1Source: Legislation.gov.uk (Dec 2015)

Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.

Do you know where the Pound is heading? Volatility Chart of the British Pound against the US Dollar and the Euro 2014 – 2019 Exchange rate chart of MSCI Emerging Currencies index against GBP to USD Currency Risk 101, Currency risk can have a material impact on investments Example of a risk in a Global 60/40 portfolio vs Home-biased 60/40 portfolio Risk definitions How currency volatility can affect a portfolio What is currency hedging The effect of currency hedging on risk in a Global 60/40 portfolio Reasons not to hedge

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2Source: BlackRock, December 2019. The amount is shown in US dollars.

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