Quote:
Originally Posted by ianch99
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Conveniently forgets that the markets tend to act in a particular direction, if they can be persuaded that other are going to act the same way. So when certain quarters were saying that with a leave vote, that the pound would go down, they had to sell before others did. That pre-emptive selling drives the price down, rather than any actual real reason.
EG On Black Wednesday, the German Bundesbank and the BBC
were going around saying there was going to be a devaluation of the £. As such the traders were forced into selling sterling which drove the price down. By then buying sterling back after it had died down, they made a profit.
Theoretical example, you have £100m, the rate is 3DM/£. you sell the £100m giving DM300m. The price drops to 2.5DM/£ and you buy sterling, giving £120m, £20m profit.
Similarly with shares, if enough people can be persuaded that the shares of a company will rise, they will buy the shares hoping to make an easy profit by then selling them. That will drive the price up, artificially making it look like they were right. A self-fulfilling prophecy.
Still nothing whatsoever to do with a drop from $2 to $1.40.
March 2016 $1.4248, May 2021 $1.4065. Selected rates but, not a huge difference,