Because you can

Sluggish sterling

A droopy day for Sterling took it lower across the board with an average decline of -0.7% against the other dozen most actively-traded currencies. There were no events or data to account for the Pound's weakness: the line taken by the financial media was to blame it on Brexit worries.

In the six months since Britain voted to leave the European Union "Brexit" has carried the can for just about all of Sterling's woes.  Much of the blame is warranted: the government is preparing to leave the EU and investors are uncertain what this will entail. A change to the economic status quo is by no means always a bad thing but when no one knows what form that change will take it is more likely  that investors will be cautious than to be unreservedly optimistic.

However, it is easy to imagine that the halcyon days before 23 June marked a bright period of untrammelled progress for the Pound. They didn't. Between New Year's Eve 2015 and referendum day Sterling lost ground everywhere, falling by an average of 5.2%. Among those losses were five Euro cents, five Swiss cents and a thumping 24 Japanese Yen. The only currency to do almost as badly was the US Dollar, which gained less than a third of a cent.

All the bad news priced in?

Since the referendum the Pound has fallen by a further 13%, taking its cumulative average loss for 2016 to 17.5%. Some say it has fallen too far but, as the year draws to a close, there does not seem to be a long queue of bargain-hunters eager to pick it up cheaply.

It is likely that 2017 will not bring a repeat of the shellacking that sterling suffered this year. Equally, with another three months to go even before the Article 50 trigger is pulled and negotiations begin in earnest, investors might not be much wiser about it all in 12 months' time than they are today. A storming rebound therefore does not seem to be on the cards.

Mathematically, the Pound is more likely to be at current levels in a year's time than it is to be substantially higher or lower. That is not a prediction, it is a recognition that there is as much chance for it to go nowhere than for it to soar or plummet.

To hedge or not to hedge?

The last few days have demonstrated that, oversold or not, Sterling may not be out of the woods yet. Anyone who would be hurt by a further sharp decline, however unlikely, may want to consider hedging their risk.