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Aug 26 - 06:55 AM

GBP/USD - COMMENT-A Different Kind Of Crisis For Sterling

By Peter Stoneham  —  Aug 26 - 06:05 AM

Sterling is in crisis but its current troubles differ from the usual event shock depreciation.
This is a different kind of crisis and one that could lead to even deeper losses.

Since being dumped out of the European Exchange Rate mechanism in 1992 sterling has been beset by a number of major blows.
Events that brought immediate moves lower in GBP/USD.
Now, the pound is again struggling but not because of a seismic shock but because of a long drawn out burn as the UK endured first the COVID pandemic and now prospects of another recession at the hands of Bank of England rate hikes and surging inflation.

A deepening of the UK energy crisis is set to extend the pound's fall and the market will look to the March 2020 lows. nL8N3013RL

Having lost 18% in value since June 2021 sterling could lose another 10% if the UK economy slips into recession and inflation becomes entrenched.

There is little in the way of major support below the $1.1413 March 2020 low until the $1.0520 low from 1985.

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Source:
Refinitiv IFR Research/Market Commentary

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