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GBP/USD strikes worst levels since 1985

currency-newsGBP/USD strikes worst levels since 1985
The pound fell sharply against the majority of its peers on Wednesday in the wake of some cautious remarks from Bank of England (BoE) policymakers.

Sterling is licking its wounds this morning, with GBP/EUR subdued at €1.1511 and GBP/USD muted at $1.1509. GBP/CAD has slipped to C$1.5093, while GBP/AUD and GBP/NZD hold steady at AU$1.7048 and NZ$1.8980, respectively.

Looking ahead, will a bumper interest rate hike from the European Central Bank (ECB) propel the euro higher today?

What’s been happening?

The pound was met by considerable selling pressure during yesterday’s European trading session, after BoE policymakers appeared before Parliament's Treasury Select Committee.

Sterling weakened amid a cautious outlook from policymakers, with BoE Governor Andrew Bailey suggesting there was nothing the bank could do to prevent the UK falling into a recession.

The broadly downbeat remarks quashed hopes the bank may pursue a 75bps rate hike next week.

The euro got off to a slow start on Wednesday, after Germany’s latest industrial production figures reported factory output contracted in July.

However, the single currency began to find momentum later in the session amidst hawkish expectations for the European Central Bank’s impending interest rate decision.

Across the pond the US dollar remained in strong demand after some underwhelming Chinese trade figures spooked markets and bolstered the appeal of the safe-haven currency.

What’s coming up?

Centre stage today will undoubtedly be the ECB’s latest interest rate decision.

Following a hotter-than-expected Eurozone inflation release last month, the ECB is now expected to deliver a bumper 75bps rate hike this afternoon, rather than the 50bps hike previously signalled by the bank.

A more aggressive hike could help to shore up support for the euro, although its upside potential could be tempered if the ECB’s macroeconomic forecasts are largely downbeat.

For USD investors the focus is likely to be a speech by Federal Reserve Chair Jerome Powell. Will a hawkish outlook from Powell help to buoy the US dollar?

Meanwhile, Liz Truss is expected to officially announce her energy price freeze, with the pound potentially rising if GBP investors are receptive to her plans.
Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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