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British Pound at Record Low, Euro Plummets as Economic Outlook Dims

Forex Sep 25, 2022 11:54PM ET
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By Ambar Warrick

Investing.com-- The British pound hit a record low on Monday, while the euro fell to a 22-year trough as growing concerns over worsening economic conditions in Europe saw the dollar flush with safe-haven trades.

The pound fell as much as 5% to a lifetime low of $1.0384, with doubts over the UK’s fiscal stability growing after the country announced extensive tax cuts in the face of a looming recession.

UK Chancellor Kwasi Kwarteng last week unveiled the country’s biggest package of tax cuts in 50 years to support laggard economic growth. But markets were doubtful over the sustainability of such a move, given that the country faces slowing growth and twin deficits.

Data on Friday also showed that UK business activity shrank in September for a second consecutive month. The Bank of England, which recently hiked interest rates, also warned that the UK economy may already be in recession.

The euro slumped 0.5% to a new 22-year low of $.09643. A batch of weak Eurozone economic readings last week saw investors pricing in a likely recession in the bloc. Fears of a brewing energy crisis and a potential escalation in the Russia-Ukraine war also dented sentiment towards the currency.

High inflation has been the biggest headwind for UK and Eurozone economies this year, as both business and consumer spending wilted under increased price pressures.

Weakness in the pound and the euro saw the dollar index touch a new 20-year high on Monday, as the greenback continued to benefit from safe-haven buying. Rising U.S. interest rates have greatly boosted the reserve currency this year, and are likely to keep it elevated in the near term.

The Federal Reserve also signaled last week that U.S. interest rates are set to rise even further this year, likely ending 2022 at a 16-year high of 4.4%.

British Pound at Record Low, Euro Plummets as Economic Outlook Dims
 

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Comments (5)
Ken Roth
Ken Roth Sep 26, 2022 9:23AM ET
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the only relevant vision to set for Brittain is getting back into EU as soon as possible. UK is loosing competent financial workers to the continent. UK cant get low level labour to drive UK trucks to deliver goods. UK cannot do business outside England due to restrictions. 50% of UK export is to the EU market greatly negatively impacted by being outside EU. UK are not getting new investments in factories for parts. If you are are company outside Europe where willl you place your plants if you want to sell to 650 million people. Outside EU in England with a population of 60 million or inside EU...take a wild guess.
rj ja
LUVGOLD Sep 26, 2022 9:23AM ET
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That would be like the U.S. letting all of the North American and South American countries dictate to us what we can and can not do. The EU is nothing but a UN styled, useless, bureaucracy run by liberal bureaucrats. The best thing the U.K. ever did was Brexit, re-gaining their independence from the E.U. and it's policies. The U.K. will be just fine once energy prices stabilize which will happen once Republicans re-gain control of the U.S. government and we are able to export everything the U.K. needs as far as fossil fuels are concerned.
Drupal Grupal
Drupal Grupal Sep 26, 2022 2:09AM ET
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speaking strictly technically. pound is destined to touch or nearly touch parity with USD in short term, no matter whatever the policy makers do. it is the most interesting trade developing in the financial markets.
jon wick
jon wick Sep 26, 2022 1:49AM ET
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UK suffers from cost-push inflation, and US from demand-pull. Hiking interest rates does not help much when this is the case.
Mo Lm
Mo Lm Sep 26, 2022 1:49AM ET
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You must be the smartest man in the world. We should make you secretary of the interior. Brought to you by Carl's Jr.
Mo Lm
Mo Lm Sep 26, 2022 1:33AM ET
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Soros 2.0
Nils Hullmann
Nils Hullmann Sep 26, 2022 12:23AM ET
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faschist eu crumbles
 
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