Sterling down a hefty 2% on the week so far

Hi everyone,

 

It has been a week and month (August) to forget for the Pound, having lost value against all its G10 rivals. £-$ rates have dropped a scary 15% in 2022 and GBP looks set to be the worst performing major currency this year. Sterling suffers whenever global risk sentiment turns sour and that's exactly what happened last Friday after Fed Chair Powell sparked a huge market sell-off with his comments on inflation.

 

Suggesting the Fed will do "whatever it takes" to bring inflation back to 2%, will cause pain in terms of economic growth and high unemployment as interest rates will continue to rise to curb inflation. This is bad news for business and stocks generally and so investors have retreated into the worlds most traded and safe currency, the USD. 

 

Sometimes the currency game is as simple as that, stocks go down and so does the Pound and visa-versa. But there are hundreds of other variables also at play that move the market constantly. One of those will come to the forefront next week with the UK announcing a new PM. There will be volatility around the event and again on the 22nd, where the new leader is expected to announce an emergency spending package to help with surging energy costs. This may be good news for £. We also have key interest rate decisions from central bankers, so we are in for a big month on the market in terms of data and volatility. 

 

For now, we suggest letting the dust settle for the remainder of the week for £ sellers and see where we are come Monday. August has historically been poor for the Pound due to a lack of liquidity in the market (summer holidays), so let's see what September may look like by watching the market over the next few days. Anyone buying the Pound are in 'good headache' territory, but trading now would be the wisest decision in our opinion. 

 
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