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Pound crashes again with fears of more decline against dollar and EU in Truss’s final days | City & Business | Finance


Against the Euro, it similarly slipped to €1.11 following the mini-budget, before returning to €1.16 on Thursday. After being closer to €1.15 this morning, as of 8.30am it slipped to a low €1.14.

Despite the intra-day fluctuations, the pound has been on a slow decline against the dollar since last yr. It has also seen an overall downward trend against the euro since March.

Patrick Bennett, a strategist at Canadian Imperial Bank of Commerce, is now predicting that sterling may slide to $1.09 by the top of the yr.

He told Bloomberg: “I expect GBP to stay pressured and international investor confidence in gilts and sterling will take time to get well.

“After personnel changes up to now, the hurdle to regain that confidence keeps getting higher.”

The pound rallied by one percent on Thursday, before sliding barely backwards as rhetoric from the US federal reserve gave the dollar a lift.

The Biden administration is now expected to extend the federal base rate of interest for a fourth consecutive time in early November.

Investors are believed to see rates continuing to rise within the US for the rest of the yr, with an expected peak of around 5 percent early next yr.

Lisa Cook, a member of the Federal Reserve board, said on Thursday that soaring inflation – which has placed immense pressure on global economies – would likely require “ongoing rate hikes” and “keeping [fiscal] policy restrictive for a while”.

Where the pound will go next in comparison with other currencies will largely rely upon the Government’s recent fiscal plan under Mr Hunt, who after U-turning on lots of the policies of “Trussonomics” has yet to put out his vision for the UK economy.

Nevertheless, an anticipated medium-term fiscal plan, as a consequence of be announced on October 31, is prone to be delayed because the Conservative Party selects its third leader in a yr.

Sterling can also be affected by the Bank of England’s (BoE) stance, which has been accused of sluggishness in response to calls to boost rates of interest to stem spiralling inflation – which within the UK hit 10.1 percent in September.

The Bank has raised its base rate of interest seven consecutive times since December last yr, after a record low throughout the pandemic. The newest – an increase of 0.5 percent – took the speed to 2.25 percent.

Nevertheless, Ben Broadbent, BoE deputy governor, this week signalled that it was not yet clear whether further rate rises were needed, as investors expected.

Tim Baker, head of macro research at Deutsche Bank in Australia, said the firm was bearish about sterling, but this was “more due to the stagflationary mix and questions on whether the BoE might be as aggressive as they should be”.

More to follow…

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