The currency and stock markets have been in a remarkable state of turmoil for many weeks now, and perhaps one of the most exaggerated differentials in price has been between the Western major currencies and the British Pound.
Traders and investors have been turning their back on the Pound Sterling, which has been struggling to retain its long-held status as the world’s most valuable currency, and the charts have been displaying a continued downward direction for the British Pound for many weeks, a direction which has only begun to slow over the past few days.
Today, however, the Pound has begun to soar! It is now at 1.13 against the US Dollar, a position it has not visited for many weeks.
Many market commentators and analysts have been highlighting what appears at first glance to be a ‘turnaround’ for the British Pound, but the reality is that it is far from a turnaround – it is just a minor step up from the days before, as the Pound still languishes at a low value after weeks of decline, punctuated by an array of government U-turns, a mini-budget which was not well received at all, and the most short-lived Chancellor of the Exchequer (Finance Minister) in British history, Kwasi Kwarteng who was shown the door after just a few weeks in his position.
Today, Jeremy Hunt, the replacement for Kwasi Kwarteng, is set to make an emergency statement relating to the outcome of the mini-budget, in which it is anticipated that he will tear it up and start again.
Mr Hunt, the most recent senior government minister to be installed without a single free vote having been cast, is the subject of high expectations from the British public who are weary at the floundering government’s effect on the economic situation of the country.
Mr Hunt’s reason for issuing a statement today is to attempt to calm the markets. One of the items on the agenda today is a statement to the House of Commons at 3.30pm, bringing forward measures from the Medium-Term Fiscal Plan, which is due on October 31.
Some critics have stated this morning that these statements are aimed at buying the government time, and there are even speculators who have aired their view that newly installed Prime Minister Liz Truss may be ousted by her own political party very shortly, which is perhaps one reason why a relatively cautious view is being taken by investors with regard to the British Pound and stocks listed on the London Stock Exchange’s FTSE 100 index.
As an undertone to all of the high profile government chaos and economic pandemonium, the Bank of England has been raising interest rates since the beginning of this year and speculation is currently abound that they may well reach 5% in January 2023, and has been buying bonds to the tune of £65 billion which is in effect a way of printing money to bolster a flagging economy.
Many banks pulled mortgage products off the shelves in the concern that interest rates may rocket, and this has been yet another indicator to traders and investors to be cautious.
It would therefore be prudent to assume that many people will be looking out for the results of today’s announcement at 3.30pm UK time.
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