: British pound below $1.14 for the first time in 37 years as the U.S dollar’s rally continues

by | Sep 16, 2022 | Stock Market

The British pound on Friday crashed to its lowest level against the U.S. dollar since 1985 –– hitting $1.13 in the early hours of London trading. Sterling
GBPUSD,
-0.78%
plummeted to a 37-year low after U.K retail sales dropped sharply by a bigger-than-expected 1.6% between July and August, driven by rising prices and the cost of living, the Office for National Statistics reported on Friday. The pound was recently down 0.8% at $1.1380.

The drop is ironically marked by the anniversary of Black Wednesday, where in 1992, the collapse in the pound forced the U.K government to withdraw from the European Exchange Rate Mechanism after it could not prevent the crash of sterling below the ERM limit. The collapse was predicted (or a self-fulfilled prophecy) by billionaire hedge fund manager George Soros, who built up a large short position against the pound. In a note to clients on Friday, Citi analysts recommended shorting sterling vs the dollar “given our bearish rates view and the fact that our historical analysis suggests JPY FX intervention is rarely successful.” When central banks aggressively raise rates to squeeze financial conditions, “one of the only places to hide is in USD cash,” said a team of analysts led by Jamie Fahy. Citi is one of the world’s largest prime brokers of foreign exchange. Other analysts echoed the bank’s views on the pound. “[The dollar] tends to perform well when there are concerns of global recession, an …

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