Pound on brink hitting SAME LEVEL as dollar: Plunges to lowest level in almost six years

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Concerns over Britain’s economic prospects led to the pound sliding about five percent against the greenback last month. The last time the pound fell as much against the dollar was in October 2016 in the wake of the Brexit referendum. And now traders are betting on sterling hitting parity with the dollar, with Chris Turner, ING head of currency strategy, saying the outcome was “definitely within the realms of possibility this year”.

He said: “It’s a very difficult environment for sterling. These sales are both equities and gilts at the same time, [that] smacks of a ‘sell UK’ mentality. In the bond markets there are some concerns developing about the UK’s fiscal profile.”

The pound lost 4.6 percent against the dollar last month. It has fallen by nearly 15 percent this year, fuelled by concerns about slowing growth in the economy and inflation soaring into double digits.

Sterling fell against the dollar to its lowest level since March 2020.

Currencies around the world have been falling sharply against the dollar, with the euro also down heavily on Thursday.

Analysts say a combination of inflationary pressures, economic weakness and uncertainty about the policies of the next prime minister has made the pound especially vulnerable.

Pound

The pound slid to its lowest level against the dollar for six years (Image: Getty)

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Pedestrians walk across Waterloo Bridge with the skyline of the City of London in the background (Image: Getty)

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UK inflation rose to its highest in 40 years in July, hitting 10 percent. It is predicted to climb even higher and squeeze pay packages further.

Viraj Patel, global macro strategist at Vanda Research, said: “It seems like a bit of a perfect storm now for the pound.

“There’s also a Liz Truss risk premium starting to get priced in. Clearly the market is not responding well to some of the policies Truss has announced, especially the funding of the twin deficit in the UK.”

August was also sterling’s worst month against the euro since May 2021. It recovered 0.4 percent on Thursday to 86.19 pence per euro, after earlier hitting its lowest in two months.

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People walk past a Topshop and Topman store on Oxford Street

People walk past shops in Oxford Street (Image: Getty)

shoppers on Briggate

Shoppers on Briggate in Leeds (Image: Getty)

The pound’s problems have been compounded by a strengthening dollar. The US dollar index, which measures the greenback against a basket of currencies, was last up 0.9 percent at 109.74. It earlier reached a new, 20-year high of 109.99.

The greenback also hit a 24-year high against the Japanese yen earlier on Thursday, boosted by the ever widening gap between the yields on US and Japanese Government debt.

Michael Hewson, chief markets analyst at CMC Markets, said: “It’s not just sterling weakness – it’s a dollar strength story.

“Sterling has its problems, but they are not unique to it – high inflation, surging energy prices and falling disposable incomes.”

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The riches people in Britain (Image: Express)

Analysts forecast more pain for the pound with some predicting it will test its all-time low in the months ahead.

Equity traders were unable to cheer the weakness in the pound as shaky economic figures from China and the prospect of hefty rate rises across economies kept the largest global markets firmly in the red.

Chris Beauchamp, chief market analyst at IG, said: “The runaway train of losses has rattled further down the track today, as the gloom among investors deepens.

“September has a mixed track record at best in the past 20 years, but this could be one of the worst months of the year so far if today is any guide.

Pound

A view of pound coins, pound notes, dollars and euros (Image: Getty)

“Investor pessimism has returned with a vengeance over the past week, and fears of a recession across the globe, and not just in Europe, means that a return to, and drop below, the June lows now seems likely for a host of markets.”

The FTSE 250 closed in on almost two-year lows while the FTSE 100 slipped to its lowest for six weeks.

London’s top index ended the day down 135.65 points, or 1.86 percent, at 7,148.5.

Elsewhere in Europe, the Dax fell to its lowest level since mid-July after sentiment was impacted by weak Purchasing Managers’ Index (PMI) data from China.

The German Dax declined 1.6 percent by the end of the session and the French Cac finished 1.48 percent lower.

The biggest risers in the FTSE 100 were JD Sports, up 1.45p at 114.4p; Pearson, up 10.6p at 873.4p; Centrica, up 0.78p at 76.52p; Avast, up 6.2p at 713.2p and SSE, up 12p at 1,664.5p.

The biggest fallers of the day were Entain, down 97.5p at 1,175.5p; Intermediate Capital Group, down 102.5p at 1,264.5p; Rolls-Royce, down 5.69p at 71.31p; 3i Group, down 82p at 1,133.5p and Glencore, down 31.3p at 442p.



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