Investors lose confidence in the UK/£
After writing a negative report Monday on the Pound, just a heads up that today's is much, much worse..
As you know, the week started horribly with poor UK GDP data which sent Sterling to 2022 lows versus a basket of currencies. 48-hours later, GBP has suffered a bit of a collapse. A number of headwinds are at play with uncertainty leading the pack both politically and economically. £-€ rates are trading at its lowest point since April 2021 and the £-$ is at the lowest levels since the covid panic in March 2020.
It puts GBP v EUR a clear 6-cents away from March's high point and closer to 1.10 mid-market than 1.20 for short and long-term consensus. The Pound continued sliding yesterday morning after firstly UK jobs data missed forecasts. Stock and bond markets then took another dive and the unproductive discussions between the EU & UK over the NI protocol came to light.
Political unrest in Northern Ireland and poor trade relations with the EU is bad business for the UK and £. Scottish independence talk is also negative and yesterday, First Minister Nicola Sturgeon refreshed the case, sending Sterling lower. The ECB announced an emergency meeting for today to discuss bond yields, after they rose sharply in Greece and Italy, further enhancing the chances of a July rate hike. Then finally, traders are placing positions on the Pound before the BoE statement tomorrow. Economists believe the central bank has lost control of inflation and the tepid move of 25 basis points tomorrow is inadequate to say the least.
The £ has jumped up today across the board though. Nearly 1% has been clawed back so far, which represents some respite for anyone that would like to exchange before the risk event tomorrow. There is no guarantee that tomorrow will push GBP back down, but there is a high chance of this scenario. The outlook remains resolutely bleak at best for the Pound as a perfect storm forms.