Sterling’s price drifted over the course of last week against the euro and is now well over 1% weaker than last Tuesday. The picture is little better against the US dollar this morning, with last week’s losses beginning to be reversed, yet GBP/USD still at the lowest for two and half years.
The key reason for sterling’s fall was the speech by US Federal Reserve Chair Jerome Powell on Friday, which has led to a “risk off” attitude in the markets, where they search for safer assets in a time of stress for the global economy. The pound is seen as a riskier asset these days.
Following yesterday’s bank holiday, the last week of the summer holidays will see few data releases of note from the UK side. There is a sense of statis in UK politics as the country waits to see who the 160,000 or so members of the Conservative party have chosen to be the nation’s prime minister. The result will be announced on Monday and then either Liz Truss or Rishi Sunak will start work that day.
He or she will have plenty in their in-tray. According to Goldman Sachs, the UK will be in recession by the end of the year and will remain there for the entirety of 2023. This is a sharp reversal of its previous prediction of a 1.1% growth next year, and echoes the Bank of England’s own forecasts.
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