💵 The pound vs. alternatives

Hey all.

The pound’s been cruising for a bruising lately, with the currency tumbling to an all-time low against the US dollar last week. And while it’s bounced back in the last few days, we’re still a far cry from where we were at the start of the year.

But with most of the focus on the impact on traditional assets, we thought we’d take a closer look at what all this means for the alternatives market.

💵 The recap

The UK government has taken a novel approach to the inflation crisis, unveiling a sweep of unfunded tax reforms that lowered the basic rate and abolished the top rate altogether. The prospect that the UK would suddenly be awash with consumer cash and heavy with national debt shook confidence in the country’s economy, causing the pound to collapse 2% against the dollar.

But the response didn’t put the government off: it doubled down over the weekend, and even promised “more to come”. That sent the pound tumbling another 5% against the dollar, with the Bank of England refusing to step in and roll out emergency action. And while chancellor Kwasi Kwarteng finally pulled a U-turn on Monday, the sudden loss of confidence in the pound might well have lasting repercussions.

💵 The kicker

The kicker here is that the pound is up against a dollar that’s going from strength to strength. The Fed, after all, has been raising its key interest rate at a serious clip, making the dollar more appealing to international savers and investors. What’s more, the greenback is a safe haven in times of economic uncertainty, which is exactly where we find ourselves today: China’s zero-covid policy, the war in Ukraine, and widespread energy crises are just a few factors that risk tipping the global economy into recession.

💵 The impact

The impact of the currency crisis will be felt far and wide, but there’s a couple of things to bear in mind as far as the alternatives market goes. For one thing, British sellers of everything from trading cards to fine wine will be on the lookout for American buyers, whose dollars are now looking all the more appealing. British buyers, meanwhile, might opt to steer clear of dollar-denominated collectibles, given that their cash won’t go nearly as far. That could weigh on demand going forward.

Also worth noting is that the British companies responsible for grading trading cards – think PSA and Beckett – are already raising their fees to offset the poor exchange rate. That’s unlikely to impact demand for the highest-end goods, but it could have a negative effect on the low-to-middle end.

💵 The final verdict

The pound might have recovered in the last few days, but it’s not a particularly meaningful move when you consider the currency’s overall performance this year. Consider too that the short-term outlook is seriously unpredictable, with plenty of volatility still to come. So if you’re looking to buy or sell, you’ll want to be cautious about it.

If you are keen to invest in these choppy times, you might want to think about buying in US dollars, storing your assets over there and selling them on Stateside markets. That way you won’t be exposed to the ebbs and flows of sterling, no matter what the government decides to do next.

That’s all from us. See you next week.

The Relic Team