By Luke Dyson
What a week we have had for sterling across the board, we have seen extreme amounts of volatility day to day with multiple cent movements across all GBP majors.
For Sterling-Euro we saw a six cent drop earlier on this week with continued volatility throughout, but no clear direction of market movement as of yet. This was off the back of Chancellor Kwasi Kwarteng’s fiscal announcement which got investors to believe the UK’s debt levels would break above unsustainable levels. Following on from this drastic market crash the Bank of England then intervened in an attempt to stop this market free fall. They bought large quantities of long duration bonds to stabilise the disrupted debt sector which was putting major pension funds in jeopardy. Which then saw UK, US and European bonds rally, bringing down yields and relaxing the current market concerns. Off the back of the Bank of England’s bond purchase earlier this week, yesterday and early this morning it seems sterling has now managed to recover to some extent to pre market crash levels. However this could be very short lived and just be a rebound off the back of the sudden drop.
For Sterling-Dollar we saw a similar market drop, with this movement braking through to the market lows of 1985 and just narrowly missing the further low of 1951, the market then recovered to some extent but not making it back to pre crash levels in direct comparison to the Euro.
With the current concerns of inflation and the UK’s government debt repayment crisis off the back of the interest rates being heavily hiked and with the intention of them being drastically risen further in the near future, this leaves a massive amount of uncertainty for sterling strength in the weeks and months to come. If you have an up and coming currency requirement please consider the risk, this market volatility could cost you thousands of pounds if the market loses its footing again. Get in touch with A Place in the Sun Currency today to see what strategies we can offer to limit your currency exposure.