Sterling weakened fairly spectacularly over the course of yesterday against the euro – by well over 1% – and by around 0.8% against the US and Australian dollars.
The drop followed comments by Bank of England (BoE) governor Andrew Bailey that British people faced a “historic shock to real incomes” as energy prices damage economic growth and demand.
The risk of “stagflation” – low growth but high inflation – is the biggest threat the Bank has faced since it was charged with setting interest rates in 1997, he said, echoing comments from the Office for Budget Responsibility last week that household incomes would fall at the sharpest rate since the 1950s.
There will be more speeches from central bankers in the UK, US and EU over the course of the week, and the Bank of England’s Quarterly Bulletin today at 12pm.
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