What's going on?

The British pound is at its lowest level in 31 years (versus the US dollar) after it sold off about 12% since the Brexit vote. Needless to say, this is a big deal!

What does this mean?

A lower currency increases the cost of importing goods. As a result, prices rise (a.k.a. inflation goes up), e.g. coffee and petrol will be more expensive. Inflation is bad for the value of bonds because bonds pay the owner a fixed amount of cash�every year. Higher inflation erodes the value of that payment because the same amount of cash can�t buy as much stuff as it used to. And so bonds become less valuable to investors.

Why should I care?

The bigger picture: It�s all about UK interest rates. In the next few months, it�s likely they will go lower. Why? Because the UK�s central bank will probably try to support the economy by making it cheaper for people and businesses to borrow and spend money. But, if the pound stays weak over the longer term, it�s possible that inflation in the UK will increase too much. A little bit of inflation is ok, but a lot of it can be very bad for the economy. Increasing interest rates is the main way to combat inflation (because it dampens the economy and, thus, dampens demand for things which, in turn, keeps a lid on prices). Higher interest rates would affect things like mortgage rates and, perhaps, hurt house prices.

For you personally: Welcome to the new reality. Stuff in Britain is probably going to get more expensive due to inflation. So, if you live in the UK, you can expect to have less left over in your wallet at the end of the day.