Is the pound really turning into an emerging-market currency?

Some analysts have suggested that sterling's volatility makes the pound "more like the Mexican peso than the US dollar". John Stepek asks whether this is true, and explains why it matters for your portfolio.

Foreign currency exchange rates © Simon Dawson/Bloomberg via Getty Images
The pound has been up and down like a yo-yo since the Brexit vote © Getty
(Image credit: Foreign currency exchange rates © Simon Dawson/Bloomberg via Getty Images)

The pound is more like the Mexican peso than the US dollar. Its movements, since the Brexit vote, have become “neurotic at best, unfathomable at worst.” In short, sterling is more like an emerging market currency, than one of the world’s most widely-traded forms of fiat money.

That’s the conclusion of one Bank of America analyst, and one which has drawn a fair few headlines. So is it fair?

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John Stepek

John Stepek is a senior reporter at Bloomberg News and a former editor of MoneyWeek magazine. He graduated from Strathclyde University with a degree in psychology in 1996 and has always been fascinated by the gap between the way the market works in theory and the way it works in practice, and by how our deep-rooted instincts work against our best interests as investors.

He started out in journalism by writing articles about the specific business challenges facing family firms. In 2003, he took a job on the finance desk of Teletext, where he spent two years covering the markets and breaking financial news.

His work has been published in Families in Business, Shares magazine, Spear's Magazine, The Sunday Times, and The Spectator among others. He has also appeared as an expert commentator on BBC Radio 4's Today programme, BBC Radio Scotland, Newsnight, Daily Politics and Bloomberg. His first book, on contrarian investing, The Sceptical Investor, was released in March 2019. You can follow John on Twitter at @john_stepek.