Market Update

The pound slipped against the dollar as traders weigh up the UK government’s U-turns and awaits a speech from prime minister Liz Truss.

Sterling had initially jumped against the US greenback in early trade, hitting its highest level in three weeks. However, it soon gave up those gains.

The more robust pound, compared its fragile state last week, will minimise slightly some of the effect of the jump in oil prices for UK consumers, given that a stronger sterling makes imports of good priced in dollars less expensive, but even at $1.14 the pound is still hovering around levels which were last broadly seen in the mid-1980s.

However, the pound is still 10% above its record low nine days ago. The dollar suffered its biggest losses for years, after a dovish central bank surprise in Australia had investors wondering whether a peak is in sight for global interest rates.

Overnight the US greenback fell around 1.6% on the euro to test parity at $0.9999.

Standard Chartered and Royal Bank of Canada both expect the pound to fall almost 10% from current levels by the end of the year.

Nomura and Morgan Stanley are forecasting it will drop to parity with the dollar during the same period.

FX strategist at Bank of America (BAC), said: “We continue to maintain a bearish view on GBP and look for GBP/USD to breach 1.10 and EUR/GBP through 0.90.

The ongoing energy crisis in Europe, which is likely to trigger recessions across the continent, has also left the pound and the euro at very weak levels.

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