The British pound has slipped against the US dollar over the past year, hitting a 37-year low against the greenback last week – and it could weaken even further, according to analysts. The pound hit $1.1403 on Wednesday – a level not seen since March 1985 – amid dollar strength and growing concerns about the UK’s economic outlook. This is only the fourth time the coin has hit $1.14, according to Refinitiv data dating back to 1972. The pound has since dropped some losses and was trading at $1.157 against dollar on Friday afternoon in London. “If you look at the pound since the start of the year against the other G-10 currencies, it’s clear that not only has it lost the strongest point against the dollar, it has actually lost ground against most currencies. other in the group as well,” Sonja Marten, chief FX strategist at Germany’s DZ Bank, told CNBC Pro. “The only currencies that are weaker are the Swedish krona and the Japanese yen. So it’s certainly not just the dollar’s strength, it’s the pound’s weakness.” The pound’s relentless slide this year reflects the enormous challenge facing the new Liz Truss government, at a crucial time for the British economy. UK inflation is at a 40-year high, with the consumer price index hitting 10.1% in July from a year ago amid Britain’s worst cost-of-living crisis in decades. century. A series of six consecutive rate hikes by the Bank of England – including last month’s 50 basis point increase, the biggest since 1995 – has so far failed to rein in inflation. And Truss’ economic agenda, including tax cuts and a pledge to review the Bank of England’s mandate, has also put her on a collision course with the central bank, sending markets tense. straight and pound sterling. More downside is expected Now, market watchers say the pound is sliding even further. “I think it could go further,” said Marten. “I think there’s a possibility that the price drop depends a bit on the news flow,” Marten said. She said the pound is likely to hit $1.10 against the dollar if “things go awry.” “In the short term, if things go awry, and that means Liz Truss cannot win investors’ confidence by stating how she will finance her spending and if the powers “The Bank of England’s got hit. And the whole situation with energy prices remains,” she said. “We just went from $1.23 to $1.15 in two weeks, so I wouldn’t rule it out. It’s a currency pair that tends to fluctuate widely.” Read more Wall Street experts predict when the S&P 500 will recover – and reveal how trading The stock has convincingly beat its peers this year – and what analysts say it can increase Uranium is in higher level. Here are two ETFs to play with. Stephen Gallo, head of European forex strategy at BMO Capital Markets, doesn’t see much “help” for the pound in the short-term, even as the Bank of England speeds up rate hikes. “The way we see it, the UK economy is already heading towards some form of tough economic landing. Although the establishment of more accommodative fiscal policy could ease the impact in that respect, it also risks economic overheating and boom bust cycles,” he said in a note. In an interview with CNBC Pro, Sterling’s weakness this year is largely due to structural factors. Gallo cites a clear peak in the dollar, a significant cooling of inflation in Europe and a clear de-escalation of the war in Ukraine as the necessary conditions for the pound to recover. As a result, he sees the pound trading in a $1.15 to $1.18 range in the short term. Meanwhile, Chang Wei Liang, credit and foreign exchange strategist at DBS Bank of Singapore, believes the pound will “circle around $1.14 and $1.15”. “We believe current levels will depend on the BOE continuing to introduce rate hikes to ease inflationary pressures in the UK,” said Chang.
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