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Weekly Roundup: Pound trades with extreme volatility

currency-newsWeekly Roundup: Pound trades with extreme volatility
The pound fell off a cliff at the start of last week. The previous week’s Sterling selling bias remaining firmly in place after Chancellor Kwasi Kwarteng added fuel to the fire that was his mini budget, by signalling he was planning more tax cut plans.

Speculation the Bank of England (BoE) could intervene with an emergency interest rate hike helped GBP exchange rates swiftly rebound from their worst levels.

Despite the BoE appearing to rule out an emergency hike Sterling was able to consolidate most of its gains, until Wednesday when a statement from the International Monetary Fund (IMF) criticising Kwarteng’s tax cut plans began to weigh on the pound again.

However, a timely intervention from the BoE into the UK bond market, quickly revived GBP exchange rates again. The bank’s bond purchases helped to cap the selloff of government bonds.

The pound then looked to be well on the road to recovery, until comments from Liz Truss and Kwarteng, doubling down on their budget plans saw Sterling falter again at the end of the week.

A U-turn from Kwarteng on his plans to cut taxes for high income earners has helped the pound to get off to a positive start this week, although it remains to be seen whether this will be enough to revive market confidence.

Kwarteng’s and Truss’s speeches at the Conservative party conference will therefore remain a key focus for GBP investors. If they are reluctant to reverse other parts of the mini-budget Sterling could face headwinds.
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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