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Aug 22 - 07:55 AM

GBP/USD - COMMENT-Sterling's Current Drop Is More Worrying Than Any Other

By Jeremy Boulton  —  Aug 22 - 05:50 AM

Sterling is falling a long way under normal conditions.
It has only dropped further in abnormal markets when two flash crashes during the Brexit process took it deeper.
That is why the current decline is much more worrying. nL1N2ZY0DY

Unlike those prior falls when traders had little time to react, they have been selling purposefully for months, influenced by a host of negative drivers.
Where the crashes were followed by swift recoveries this decline may be sustained and eventually take sterling much lower. nL1N2ZY0EQ

Because the negative effects of Brexit were masked by billions spent to mitigate the impact of COVID-19, it's one of the reasons to expect sustained sterling weakness now, as the Bank Of England is quickly withdrawing stimulus that has been the bedrock of economic support to target inflation which has soared way beyond target.

Interest rates are seen heading beyond 4% early next year and with mortgage rates a percent or two more, UK consumers who have grown used to cheap money may be shocked.


For more click on FXBUZ


Source:
Refinitiv IFR Research/Market Commentary

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