The pound lost around 2:10 p.m. GMT (4:10 p.m. in Paris) 0.83% to 1.1424 dollars, following sinking to 1.1406 dollars, a level not seen for 37 years.
The British pound plunged to its lowest since 1985 once morest the dollar on Wednesday, undermined by fears of recession in the United Kingdom generated by soaring inflation, while the greenback is prized as a safe haven.
Sign of the scale of the task of the new Prime Minister Liz Truss to revive the British economy, the pound lost around 2:10 p.m. GMT (4:10 p.m. in Paris) 0.83% to 1.1424 dollars, following having sunk to 1.1406 dollar, a level not seen for 37 years.
The surge in gas prices caused by the war in Ukraine threatens to plunge the United Kingdom into recession due to its dependence on this source of energy.
For the new Prime Minister Liz Truss, who is due to announce her plan to support the economy on Thursday, which might include a tariff freeze, “the balance is precarious between doing too much and not enough”, explains to AFP Francesco Pesole, analyst at ING.
On the one hand, “a demand-side remedy (lower taxes and higher public spending to offset rising energy costs on households) to respond to a supply shock raises fears of a deterioration in the financial situation in the United Kingdom,” said Guillaume Dejean, analyst at Western Union.
This makes British assets less attractive, with a surge in bond yields, and weighs on the pound.
But the option of more limited measures risks letting inflation rise in the United Kingdom. The Bank of England’s chief economist, Huw Pill, said on Wednesday morning that price containment measures would lower inflation, leading investors to expect a less marked rise in rates.
“This is what triggered the decline in the pound” on the session, but “volatility is to be expected, potentially in both directions, before tomorrow’s (Thursday) announcements on energy”, warns Mr. Pesole.
The pound returns to its 1985 level, when it had reached a historic low of 1.0520 dollars, before the strength of the dollar which crushed the other currencies pushed several countries to sign the Plaza agreements with the United States, who had decided on an artificial devaluation of the greenback.
___ Intervention on the yen?
Other currencies fared no better once morest the dollar on Wednesday: the yen plunged 1.34% to 144.73 yen, down 20% in six months and following hitting a low since 1998 at 144.99 yen.
The Bank of Japan has been less eager than its counterparts around the world to tighten its monetary policy, partly because inflation remains lower in Japan than in Europe or the United States.
“A member of the government has already said that the necessary measures should be taken to prevent the movement from continuing”, but without a tightening in prospect of monetary policy, the effect of artificial support for the yen would be short-lived, believes Esther Reichelt, analyst at Commerzbank.
“For now, we are watching what is happening with concern, but if ‘the decline of the yen’ continues, it would be logical for us to act,” commented Japanese Finance Minister Shunichi Suzuki, who declined to specify the actions potentially taken.
The decline of the yen is marked once morest the euro: -1.47% to 143.54 yen, approaching the low of the year reached in June at 144.28 yen.
The euro is benefiting to some extent from the tightening of monetary policy by the European Central Bank (ECB), which should opt for a 50 or 75 basis point hike in its key rates on Thursday.
But the European currency was up a very measured 0.13% to $0.9917, and “even ultra-aggressive rhetoric from the ECB tomorrow (Thursday) will struggle to restore a struggling euro” once morest the dollar. , warns Han Tan, an analyst at Exinity.
The euro touched on Tuesday a lowest since 1998 once morest the greenback, at 0.9864 dollars, weighed down by the risk of a recession in the euro zone caused by the stoppage of Russian gas deliveries.
Wednesday class Tuesday class
2:10 PM GMT 9:00 PM GMT
EUR/USD 0,9917 0,9904
EUR/JPY 143.54 141.43
EUR/CHF 0.9755 0.9741
EUR/GBP 0,8681 0,8597
USD/JPY 144,73 142,80
USD/CHF 0,9836 0,9836
GBP/USD 1,1424 1,1520
