Pound Sterling Weakness – Why Is The Pound Dropping So Much?

Sterling exchange rates have taken a huge hit over the course of the days trading, as the new chancellor Kwasi Kwateng’s mini-budget appears to have knocked the pound totally out of fashion.

The pound has lost over 350bps against the Dollar sitting in the 1.08 territory, whilst dropping to 1.12 against the Euro and hitting the lowest level against the Swiss Franc since 1974 sitting in the 1.06s.

There is now talk of an intervention and whether HMT will make an attempt late on Sunday night ahead of the Asian markets opening to stabilise the currency, should this not happen or not have the desired effect the Bank of England may need to step in again and look at an emergency interest rate hike less than a week after they raised rates by 50 basis points, which in all honesty wouldn’t look great.

Sterling really is taking some big blows out in the financial markets and it is tough to see how the pound will fight back, the lower Sterling exchange rates go, the more costs will spiral and the bigger the potential problem, so we are stuck in a really tricky situation of late.

I like to monitor the pound against a basket of major currencies and today was the biggest drop I can remember since the referendum, with a loss of over 10% in value against a basket of major currencies.

So where does this leave you if you have a large purchase to make be it personally or for your business overseas? The key in the coming weeks is being agile and ready to act.

We could still see a bounce back should we have an intervention or a rate hike, but you must also exercise caution that if this trend continues and you keep holding on it could be an extremely expensive decision.

If you have foreign currency to exchange back through sale of goods with your business or a personal property sale then you are probably reading this feeling pretty happy as your foreign currency has just become worth a lot more, but do be cautious not to get caught in the vicious circle of waiting and waiting then finding it bounces back and it is too late, this is a common occurrence with people in my experience.

I have been helping people move money around the world for 15 years now, if you would like to discuss the pound’s sudden loss of value or chat about a potential trade you need to carry out then feel free to email me, Daniel Wright on [email protected] and I will be happy to get in touch with you personally.

You can also set rate alerts, follow the markets, request quotes and view graphs/charts here on Pound Sterling Forecast so feel free to take a look around the site and we hope it is helpful.

Pound Sterling losses continue as cost of living crisis dominates headlines – New Prime Minister to be announced today

Pound to Euro rate continues to fall, making history in the process

Sterling exchange rates have continues to drift to kick start a new trading week, as the cost of living crisis dominates headlines across UK media.

With today being an important day for UK politics as we see the announcement of the winner in the Conservative party leadership contest, and ultimately who will be the new Prime Minister, they will almost instantaneously have to announce how they plan to combat what appears to be an extremely challenging winter for the majority of households and businesses.

It is widely expected that Liz Truss will be announced later today at 12:30 and all eyes from investors and speculators will be on her plans to keep people and certain business’s afloat as we face a difficult winter of rising costs, forced closures of retailers, and people simply having to choose between food on the table or heating the house.

This is still clearly impacting the value of Sterling exchange rates, and many feel that it will continue to impact them in the coming months too.

Capital Economics, a well-known independent economic research business has some fairly negative predictions out there for the pound, with expectations that Sterling will lose roughly 5% on a trade-weighted basis in the coming months. This essentially means they expect weakness against most majors, a 5% drop for GBP/EUR or GBP/USD would see Sterling drop below 1.10 as an example, so although it feels low now, if these predictions come true then there may be much further to fall.

It has to be said that the markets can change very quickly and forecasts can be wrong, so it is key to retain the view that things could change, however economic data in the States and the Eurozone is way outperforming the U.K at present, and the drop off in the pound only adds fuel to the fire.

A lower pound means everything imported costs more, from food to gas prices, the lower it drops the higher inflation rises and the more people are paying for goods and services, I personally am noticing costs for almost everything rising and that will be down to many things, but also a lower pound pushing up fuel, transportation, energy and packaging costs for basically every product on our shelves.

The week ahead

We have the news on the new PM later this morning to kick start the week, and as mentioned previously I believe the plans laid out off the back of that could be key for the pound in the early stages of the week.

For those with an interest in Australian or Canadian Dollars, we have the RBA interest rate decision tonight and the Bank of Canada later this week on Wednesday.

Euro followers will note growth figures on Wednesday and more importantly the European Central Bank interest rate decision on Thursday, where the market expects an aggressive 75 basis points hike in interest rates, any change to this could cause immediate volatility, and the wording used regarding future fiscal policy in the press conference after is also likely to set the tone for how the Euro performs over the rest of the trading week.

Currency exchange to carry out and worried about market movements?

If you have an exchange to carry out, yet you are concerned about what is going on currently then feel free to get in touch with us today. We are experts in this field and whilst we cannot directly advise you we can help you negotiate these challenging times along with having a number of tools to assist you to avoid adverse market movement or to help you take advantage of a spike.

If you would like to discuss anything within this article in further detail feel free to contact me at [email protected] and I will be happy to help you.

Alternatively, Click this link and let us know your requirement and we will be in touch to discuss your options in more detail.

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Where interbank exchange rates are referenced within the website these should only be used as a guide on the performance of a market. These rates are not indicative of our exchange rates – please contact us for a quote.