GBP/USD Exchange Rate Slides to New Two-Year Low
The Pound US Dollar (GBP/USD) exchange rate has sunk to its worst levels since March 2020 amid aggressive Federal Reserve rate hike bets.
At time of writing the GBP/USD exchange rate is around $1.1773, a 0.8% drop from this morning’s opening levels.
US Dollar (USD) Strengthens amid Heightened Rate Hike Expectations
The US Dollar (USD) is set to continue its rally against its peers today as the possibility of a 1% interest rate hike is growing. In the wake of Bank of Canada (BoC) unexpectedly raising interest rates by 100bps, markets are pricing in a bumper rise at the Fed’s next policy meeting.
Bolstering aggressive rate hike expectations are the latest inflation and PPI releases, which both printed above market forecasts in June.
Elsewhere, fears of a looming global recession also continue to underpin the US Dollar. Investors continue to flock to safe-haven currencies like the ‘Greenback’ amid rising Covid cases in China and looming energy crisis in Europe.
Pound (GBP) Softens amid Troubling Political and Social Climate
The Pound (GBP) could slide further as domestic troubles continue to compound an already souring economic outlook.
The political uncertainty surrounding the next Prime Minister is likely to continue through the summer when the next elected Conservative leader will be announced in September. The six remaining Tory candidates have been announced, but their respective varying and competing tax plans are concerning experts as a fight to win popularity could come at a cost of the economy.
Elsewhere, Brexit woes could weigh further on the Pound when the Northern Ireland protocol bill is set to pass through parliament early next week. An expected backlash from EU could trigger a trade war between the two sides, denting demand for Sterling.
Further adding to the ‘summer of discontent’ are fresh plans for railway workers to strike on the 27th July. As the cost-of-living crisis worsens, and wages not keeping pace, the National Union of Rail, Maritime, and Transport Workers (RMT) have balked at Network Rail’s ‘paltry’ pay rise of 4%.