GBP attempts to recover from historic lows

XTB Analysis Team XTB Poland

The British Pound is making headlines today due to a massive crash seen by the currency. The pound has been in freefall since Friday, following the announcement of new expansionary fiscal measures, including the largest tax cuts in decades. While these measures are aimed at stimulating economic growth, there are concerns about financing them as well as their impact on inflation. The GBPUSD (cable) pair experienced a flash crash this morning, dropping as much as 4.5% at one point of the Asian session with the pair dropping below 1.0350, the lowest level on the record. This situation is not limited to the US dollar as moves on other GBP-tied FX pairs were also massive. However, GBP managed to bounce off the daily lows and in some cases, like for example GBPJPY, the downward move was almost completely erased. The British Pound is the worst performing major currency today and while we have seen a general weakness of majors against the US dollar in recent weeks, with EURUSD remaining below parity, this reaction by the pound is concerning and could prove to be an omen of what's to come for the currency as traders look for safer choices while they remain uncertain about how the BoE and government will attempt to deal with this situation while the risk of reaching parity with the dollar becomes an increasingly likely possibility.

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XTB Analysis Team

XTB Poland

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