The pound approached its all-time low against the dollar this Friday after the British government announced fiscal measures that left investors worried about the state of the country’s finances, given the signs of a recession.
With the dollar benefiting from the strength of the US economy and its safe haven status, the pound fell 2.01% to $1.1034 at 12:35 pm (Lisbon) after hitting $1.1021, a level not seen since 1985. , year of lowest value, $1.0520.
The British government announced this Friday a series of tax cuts to try to stimulate the economy and put behind a “cycle of stagnation” at a time when the country is suffering from inflation and is about to enter a recession.
The tax cuts complement a package announced in recent weeks to freeze domestic energy prices for households and businesses, which is expected to cost £60bn (€687bn) over the next six months.
“The pound is in danger,” said George Saravelos, an analyst at Deutsche Bank, noting that the pound is falling despite rising interest rates on British debt, “which is very rare in a developed economy.”
“We are concerned that investor confidence in the UK is rapidly declining,” he added, quoted by AFP.
The British economy showed signs of weakening, with the Bank of England and the PMI private sector activity index predicting a recession in the third quarter.
The pound’s meteoric fall nearly eclipsed that of the euro, which shed 0.86% against the dollar to $0.9752 to hit its lowest since 2002 ($0.9737).
Since the introduction of the euro, the euro has lost 14% against the dollar and 18% against the pound.
Directly affected by rising gas prices since the start of the war in Ukraine, European economies are piling up signs of instability.
According to the PMI index, the decline in economic activity in the private sector accelerated in the eurozone in September.
This situation alienates investors from the euro and pound sterling, despite the increase in interest rates by central banks.
On the contrary, “The United States is in a unique position with high inflation and more robust growth, which means that the US Federal Reserve (Fed) has more reasons and means to quickly raise interest rates,” said Mark Hefele, an expert. UBS analyst.
On Thursday, the Bank of Japan, which maintained its interest rates, intervened in the foreign exchange market to stop the depreciation of the yen.
The intervention came after the dollar hit 145.90 yen, a 24-year high.
This intervention stopped the fall, but this Friday the Japanese currency recorded a decrease of 0.40% compared with the previous day, while the dollar was worth 142.97 yen.
The dollar has gained more than 20% against the yen since the beginning of the year.
Author: Lusa
Source: CM Jornal
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