Will Sterling continue to recover following last week’s dramatic sell-off?

Pound to Dollar Rate Drops to One-month Low

Yesterday the Pound begun the week in a strong fashion, following on from its recovery towards the end of last week.

During last week’s trading session the Pound traded within an 8% range against the US Dollar and the trading range for GBP/EUR wasn’t far from this kind of dramatic trading range either. I would say that it was the most volatile week of trading since the Brexit vote took place back in June of 2016.

The Pound begun to fall in value in the fall-out from the Chancellor of the Exchequer, Kwasi Kwarteng’s mini-budget report when he announced that the government planned to scrap the higher tax bracket of 45p for higher earners. Financial markets were concerned with this plan along with a number of other announcements from Kwarteng and the Pound begun to tumble as a result.

The decision to go back on this plan, along with rumoured Bank of England buying up of long term bonds to stabilise the Pound’s value and financial markets has helped the Pound recover after it hit the lowest levels in history against the US Dollar, and the lowest level against the Euro in almost two-years.

Although the Pound has now recovered against the Euro and also recovered some of the losses against the US Dollar, moving forward there remains a number of underlying issues which could put further pressure on the Pound. The Conservative Party are facing a number of challenges as there didn’t appear to be a clear consensus between them regarding the financial announcements at the mini budget. Also, Labour is leading in the polls by a considerable margin so there could be political uncertainty in future which could put pressure on the Pounds value.

When markets are moving this quickly, and political updates are having such an impact on the value of the Pound it can be difficult to know when to make currency conversions and that’s where having a currency specialist on hand to keep you updated can be helpful. We can provide you with market updates and also help set up rate alerts to keep you informed.

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