HomeFinancial MarketsSterling Set for Worst Month Vs. Dollar Since 2016

Sterling Set for Worst Month Vs. Dollar Since 2016

As the British economy slows down sharply due to rising inflation, the sterling appears set to endure its worst month vs the US dollar since late 2016. The pound was down 4.4% at $1.1645 at 0930 GMT on Wednesday. The loss eclipsed the 4.3% decline on Tuesday when the pound fell to its weakest since the COVID-19 outbreak in March 2020.

The pound has also proven to be weak against the euro, declining by 2.2% to put it on course to realizing its worth month vs the euro since April 2021. This fall is largely attributed to the rising price of gas as well as shortages, along with a rising cost of living.

Currently, UK inflation sits around 10% and is expected to continue rising, while British government bonds are expected to suffer their worst monthly decline since 1994. According to Scotiabank’s chief FX strategist Shaun Osborne, the Bank of England looks set to raise interest rates to 4.25%, a stark rise from the current rate of 1.75%.

“This would leave the BoE policy rate among the highest of the major economies but that may still not compensate investors sufficiently for inflation that is expected to run well into double digits early next year while the economy tilts into recession,” Osborne commented.

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