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Weekly Roundup: Pound pressured as UK energy crisis deepens

currency-newsWeekly Roundup: Pound pressured as UK energy crisis deepens
UK economic worries subdued the pound at the start of the week. Eight days of strike action started at the country’s largest container port while new forecasts see UK inflation hitting 18.6% in January, far higher than previous forecasts.

Sterling wavered higher on Tuesday as the UK’s flash PMIs came in stronger than the US and eurozone surveys. In particular, the country’s vital service sector performed better than expected.

GBP wobbled once again on Wednesday. While Bank of England (BoE) rate hike bets initially supported Sterling, worries about surging energy prices and ongoing strike action capped any upside.

Energy prices continued to climb through the week, prompting further losses as industry sounded the alarm over carbon dioxide shortages. CF Industries – one of the UK’s largest producers of the gas – said it would have to pause production due to rising costs.

On Friday, Ofgem announced the new energy price cap, which rose by 80%. Sterling subsequently weakened against its stronger peers.

So far this week, GBP has dropped to fresh lows. As the Tory leadership contest enters its final weeks, markets are seemingly worried about the approach frontrunner Liz Truss may take in the likely event she becomes prime minister.

UK data is thin on the ground, so politics could continue to impact Sterling. If the government reveals any new policy measures to tackle the worryingly high surge in energy bills this winter, the pound could find support. Otherwise, troubling headlines about the UK economy and any further rises in gas prices may pressure GBP.
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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