My humble opinion on British Pound

There are few criterias that I look at when I analyse a currency:

GDP growth:
GDP growth usually leads to rising property market, better business opportunities and more employment. Capital usually flows to country with healthy GDP growth, that helps to strengthen the currency.

Facts: Growth in the UK economy will slow to 1.7 per cent in 2017, according to the latest forecast from the National Institute of Economic and Social Research (NIESR).
=> GDP growth is slow but it is not disastrous.

Inflation:
High inflation is the primary reason for raising interest rate. Higher interest rate usually drives up demand for the currency.

Facts: Consumer prices overall increased by 2.9 percent compared with a year earlier, the Office for National Statistics said, up from 2.6 percent in July and above the median forecast in a Reuters poll of economists for a rise of 2.8 percent.

=> Renewed hike hopes lift pound to one-year high against dollar as rising inflation tightens the squeeze on UK households.
Link: www.telegraph.co.uk/business/2017/09/12/pound-jumps-132-against-dollar-ahead-key-uk-inflation-figures/amp/

Budget surplus / deficit:
A declining budget account deficit reflects the health of the economy.

Facts: Government borrowing fell by £20bn to £52bn in the year to the end of March, according to official data. That was the lowest level since the financial crisis of 2008, the Office for National Statistics (ONS) said.
=> Healthy sign.

Long term chart:
Currencies are automatic stabilizer. It means when a currency is too expensive, it will automatically drop as it affects their exports.

When a currency is too cheap, exports will improve, it will then appreciate.

Long term chart can tell us where is the point where a currency is cheap or expensive. It usually exhibits repeated patterns.

FX pairs that exhibit repeated patterns:
- AUDSGD does not stay below 1.00 for too long. Eventually it will bounce up.
- AUDNZD does not stay below 1.0500 for too long. It will bounce up.
- EURGBP does not stay above 0.9400 for too long. It will fall.
- GBPUSD does not stay below 1.3000 for too long. It will rise.

=> Attached GBPUSD chart shows that GBPUSD is near to the bottom of a 30 years period.
=> GBPUSD tends to stay above 1.4000 most of the time in the past 30 years.

Valuation:
Westpac's model shows that GBP is the most undervalued currency among the majors.
www.poundsterlinglive.com/gbp-live-today/7220-gbp-undervalued-aud-overvalued/amp

Oxford Economics said the pound was undervalued “on a wide range of valuation metrics".
www.telegraph.co.uk/business/2017/04/02/significantly-undervalued-pound-will-bounce-back-year/amp/

UBS: The pound is 'extremely undervalued'
www.businessinsider.com/ubs-wealth-management-pound-extremely-undervalued-brexit-2017-8?IR=T

Based on the above criterias, they are reasons to believe that most of the Brexit fears has been priced in. Crisis and uncertainties often present good buying opportunities because financial market often overshoots.

There is a good chance that GBPUSD may be prone for multi-years rally when market realises that Brexit is not cause much destruction to UK economy.

When political crisis is out of the way, we should see GBPUSD above 1.4000.