LONDON: The British pound is set to record its worst weekly loss versus the dollar since September 2020, as investors worried about economic slowdown flock to the U.S safe-haven currency.
By 1225 GMT the pound was down 0.9% against the dollar at $1.183 pence - its lowest level in a month - while the dollar was on track for its best weekly performance in more than two years.
A surprise uptick in July UK retail sales failed to lift sterling, as soaring British inflation and recession risks continue to dominate traders’ minds.
The retail sales data was offset by separate data showing UK consumer sentiment plummeted to a record low in August.
Markets remain focused on data out earlier this week showing inflation at the highest level in 40 years, which ramped up fears of an economic slowdown and increased pressure on the Bank of England (BoE) to bring down prices.
Those concerns are the main factor weighing on sterling this week, according to Simon Harvey head of FX analysis at Monex Europe.
“The clouds are forming and the outlook is definitely becoming a bit gloomier and that’s what’s being reflected in the price, irrespective of the retail sales,” said Harvey.
Sterling was also 0.48% weaker versus the euro, trading at 84.950 pence.
“We’ve seen underperformance in gilts, higher pricing of inflation in inflation swaps, more hawkish pricing from the Bank of England expected by money markets, and this has all exacerbated the expected recession that’s on the horizon for the UK.” Money markets are now fully pricing in another 50 basis point rate rise from the central bank next month, according to data from Refinitiv.
Comments
Comments are closed for this article.