Pound hits lowest level since March 2020

August 30, 2022

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The pound has dropped to its lowest level in almost two and a half years, hit by recession worries and fears of more large US interest rate rises.

The British Pound's sensitivity to global stock markets leaves it stuttering against both the Euro and Dollar and only a stabilisation in global market conditions will stop the dramatic decline.

The Pound has slumped sharply against both currencies over recent sessions as investors look to bail out of stocks in fear of further interest rate hikes from the U.S. Federal Reserve.

Sterling slipped below $1.1700 for the first time since March 2020 on Monday, as concerns over the UK’s economic outlook continued to take hold. It has now lost over 13% of its value against the dollar since the start of 2022.

Soaring energy costs are putting more pressure on Britain’s economy, hammering growth and consumer confidence and pushing businesses closer to a state of collapse.

The pound was also caught up in the dramatic market selloff following last Friday’s hard-hitting speech by America’s top central banker.

Federal Reserve chair Jerome Powell reiterated the central bank’s commitment to fighting the rapid inflation, despite the trouble caused by interest rate hikes, signalling that borrowing costs will keep rising in the foreseeable future.

This triggered a slump on Wall Street at the end of last week, leading to further losses on Monday.

The Euro is meanwhile better supported against both the Pound and Dollar in recent sessions, thanks to signs the European Central Bank intends to hike interest rates sharply over coming months in response to surging inflation levels.

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