GBP Hasn’t Been This Undervalued Since Reagan Was President

The British Pound is hovering near its one-month low of 1.23 versus the USD.

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While most investors are aware of how much the pound has fallen since Brexit, prior to which the GBP fluctuated in a relatively tight range of 1.40-1.50…

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…the following chart puts the move into perspective. On a purchasing power parity basis (over the last 41 years), the GBP has not been this undervalued versus the USD since 1985. Over that time period, the current 24% undervaluation is second only to the 38% undervalued level reached in February of 1985. From there, it took a little more than two years for the currency to make its way back to parity with the dollar.

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