- GBP/USD bulls attempting to recover from massive losses.
- US dollar has hit a new 20-year top of 114.58 amid heavy volatility.
GBP/USD is down by over 1.5% on the day, but trading at 1.0698, it is well away from the lows of 1.0356 that were scored earlier in the session and rests between there and the day's high of 1.0931. We have seen a record low in the pair on the back of a renewed selloff in British gilts and concerns about high-interest rates that have continued to put pressure on the global financial system.
In particular, markets took fright at British finance minister Kwasi Kwarteng announcing the scrapping of the top rate of income tax and canceling a planned rise in corporate taxes. The reaction to the proposed plan is a real concern and adds uncertainty to the economy. Additionally, US dollar strength is weighing heavily on the FX space with the dollar index, which tracks the greenback against six peers - hitting a new 20-year top of 114.58 in early trade.
The drop in the pound is also leading to speculation the Bank of England will have to hold an emergency meeting to raise rates. The Bank of England said on Monday it would not hesitate to change interest rates and was monitoring markets "very closely".
"The Bank is monitoring developments in financial markets very closely in light of the significant repricing of financial assets," Bank of England Governor Andrew Bailey said. "The MPC will not hesitate to change interest rates by as much as needed to return inflation to the 2% target sustainably in the medium term, in line with its remit." The Treasury and central bank statements came towards the end of a day of turmoil for Britain's currency and debt with the British 10-year government bond prices now on track for their biggest slump in any calendar month since at least 1957.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
AUD/USD tumbles toward 0.6350 as Middle East war fears mount
AUD/USD has come under intense selling pressure and slides toward 0.6350, as risk-aversion intensifies following the news that Israel retaliated with missile strikes on a site in Iran. Fears of the Israel-Iran strife translating into a wider regional conflict are weighing on the higher-yielding Aussie Dollar.
USD/JPY breaches 154.00 as sell-off intensifies on Israel-Iran escalation
USD/JPY is trading below 154.00 after falling hard on confirmation of reports of an Israeli missile strike on Iran, implying that an open conflict is underway and could only spread into a wider Middle East war. Safe-haven Japanese Yen jumped, helped by BoJ Governor Ueda's comments.
Gold price jumps above $2,400 as MidEast escalation sparks flight to safety
Gold price has caught a fresh bid wave, jumping beyond $2,400 after Israel's retaliatory strikes on Iran sparked a global flight to safety mode and rushed flows into the ultimate safe-haven Gold. Risk assets are taking a big hit, as risk-aversion creeps into Asian trading on Friday.
WTI surges to $85.00 amid Israel-Iran tensions
Western Texas Intermediate, the US crude oil benchmark, is trading around $85.00 on Friday. The black gold gains traction on the day amid the escalating tension between Israel and Iran after a US official confirmed that Israeli missiles had hit a site in Iran.
Dogwifhat price pumps 5% ahead of possible Coinbase effect
Dogwifhat price recorded an uptick on Thursday, going as far as to outperform its peers in the meme coins space. Second only to Bonk Inu, WIF token’s show of strength was not just influenced by Bitcoin price reclaiming above $63,000.