Despite investors’ concerns about the economy and their continued preference for the US dollar, the value of the pound was relatively stable against the dollar and the euro on Thursday.
Due to concerns about a prolonged economic downturn, persistently high inflation, and unpredictability in government, the pound has been among the poorest performing global currencies in 2022.
Long-term investors are already worried about the state of the British economy, and new Prime Minister Liz Truss’s plans to pay for a massive energy support package by boosting borrowing have only heightened those worries.
According to Ben Laidler, global markets strategist at eToro, “there’s a lot of talk about stagflation right now, and the one country that has it right now is the UK economy.”
That’s one of the main reasons why the euro has performed so poorly this year.
The pound has dropped 0.1% versus the dollar by 07:44 GMT, trading at $1.1524, slightly above last week’s 35-year low of $1.1407.
The value of one pound was virtually unchanged at 86.495 euros.
In an effort to reduce inflation, the Bank of England (BoE) is likely to raise its interest rate by at least 50 basis points (bps) at its meeting next week, maybe as much as 75 bps.
According to Refinitiv data, the money markets are completely pricing in a rate hike of 0.5 percentage points at Thursday’s meeting and imply approximately a 65% possibility of a larger 0.75% hike.
On Wednesday, the government revealed that, for the first time in nearly a year, inflationary pressures on consumers have reduced.
The index of consumer prices excluding food, energy, alcohol, and cigarette products, however, reached a new level not seen since 1992.
Even though the government announced a fresh energy support package after the fieldwork was finished, analysts are downplaying the importance of the BoE’s monthly survey on inflation expectations, which is released on Thursday.
Lloyds Banking Group economist Hann-Ju Ho said in a note that the latest quarterly survey results are likely to be considered as somewhat redundant because they were collected in August before the government announced the Energy Price Guarantee scheme.
Mahnur is MS(development Studies)Student at NUST University, completed BS Hons in Eng Literature. Content Writer, Policy analyst, Climate Change specialist, Teacher, HR Recruiter.
