The CurrencyShares British Pound Sterling Trust (NYSEArca: FXB), which tracks the British pound’s movement against the U.S. dollar, is down more than 3% over the past month and is within pennies of its 52-week low, cementing its status as one of this year’s worst-performing currency exchange traded funds.
That is just one data point, but it say the British pound and FXB are getting worse not better as the British currency resides near its lowest levels in more than three decades. Earlier this month, the Bank of England pared its benchmark rates to a record low 0.25% from 0.5% and anticipates it will further bring it down toward zero ahead, the Wall Street Journal reports.
The BOE also revived its government bond-buying program, which has been on pause since 2012, along with purchasing corporate bonds as well.
SEE MORE: Currency-Hedged U.K. ETFs for Improving Earnings, Depreciating Pound
Furthermore, the central bank added a new term-funding program for banks, providing lenders ultra-cheap, four-year loans to help finance lending for households and businesses as an additional step to stimulate the economy.
“The pound has regained the title as the year’s worst performer among 32 major currencies. Sterling is now back below $1.30 for the first time since July as the Bank of England restarted its stimulus program aiming to shield the economy from the decision to quit the European Union,” according to Bloomberg.
Some ETFs have the potential to benefit from the sliding pound, namely currency hedged funds such as the Deutsche X-Trackers MSCI United Kingdom Hedged Equity ETF (NYSEArca: DBUK), iShares Currency Hedged MSCI United Kingdom ETF (NYSEArca: HEWU) and the WisdomTree United Kingdom Hedged Equity Fund (NasdaqGM: DXPS).
The iShares MSCI United Kingdom ETF (NYSEArca: EWU), the largest US-listed U.K. ETF, is not a currency hedged product.
SEE MORE: Brexit Continues to Drag on Pound ETF, Sends GBP to Three-Decade Low
Looking ahead, many expect the Bank of England to enact more accommodative measures to help bolster the economy. In the post-Brexit environment, Martin Weale, one of the bank of England’s long-time hawks, is even beginning to turn dovish on their policy outlook.
For more information on Brexit, visit our Brexit category.
CurrencyShares British Pound Sterling Trust
