The pound has opened the morning marginally stronger against both the euro and dollar, despite falling a step lower against both throughout the evening. GBP/EUR dipped to a fresh low for 2022 and GBP/USD remains at a near 2 year low.
The Monetary Policy Committee at the Bank of England voted to hike interest rates to new 13-year highs yesterday lunch time. Usually, this would yield positive results for a currency and increase strength, the markets however, listen more to what is said in the following press conference. The time around the outlook was downbeat as the central bank predicted soaring inflation into the double digits and a potential recession in 2023. The blame was posted on external factors, as energy prices are set to continue to rise into the tail end of year, putting further pressure on UK households.
Throughout yesterday, voters also hit the polls in the UK, with over half of the results showing a strong gain for both Labour and the Liberal Democrats at the expense of the Tories. Labour saw victories within London, in seats held by Tories for decades.
With the appetite for risk diminishing globally, the dollar has been on a strong bullish run. Heading into the weekend it would be worth a conversation with your account manager to set out a plan to cover as much risk as possible. The next step lower appears to be in the 1.22 region to buy USD with pounds.
Have a great weekend.
Author: Jack Nicholls, Senior Relationship Manager.
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