Caution Over the Pound as the Sell-Off Continues and It Falls Below 1.1 Dollars per Pound

Caution Over the Pound as the Sell-Off Continues and It Falls Below 1.1 Dollars per Pound

26.09.2022

Last weekend, the U.S. dollar continued to strengthen as the Dollar Index rose to 113.9, causing the EUR/USD pair to fall 180 pips from 0.9850 to 0.9667.The EUR/USD pair continued to decline during today’s Asian trading session, touching 0.9552. The string of new lows shows no signs of stopping. Despite comments from German Bundesbank President Nagel that “the ECB needs to raise interest rates again, even if it harms economic growth,” the pair has been unable to withstand the strength of the U.S. dollar.

Among European currencies, the pound plummeted against both the yen and the U.S. dollar. Following the announcement last weekend of the Truss administration’s major tax cut plan, the yield on 10-year British government bonds rose to 3.8%.The GBP/USD exchange rate fell from 1.1271 to 1.0836. Furthermore, during today’s Asian trading session, it plummeted by 500 pips, touching 1.0304. The prospect of parity—1 pound to 1 U.S. dollar—is becoming a reality.

Today, at 16:00, the Turkish Economic Sentiment Index and remarks by Nagel, President of the German Federal Bank; at 17:00, the GermanIFO Business Climate Index at 5:00 p.m., the U.S. Chicago Fed National Activity Index at 9:30 p.m., remarks by ECB President Lagarde at 10:00 p.m., remarks by U.S. Federal Reserve Bank of Boston President Collins at 11:00 p.m.,remarks by the President of the Federal Reserve Bank of Boston; at 23:30, the U.S. Federal Reserve Bank of Dallas Manufacturing Activity Index; at 25:00, remarks by Tenreiro, a member of the UK’s Monetary Policy Committee (MPC), and remarks by Bostic, President of the Federal Reserve Bank of Atlanta; at 25:30, remarks by Logan,Speech by Logan, President of the Dallas Fed; at 26:00, U.S. 2-year Treasury auction; at 27:35, NZ: Speech by RBNZ Governor O’Hara; and at 29:00, U.S.: Speech by Mester, President of the Cleveland Fed.With the sell-off in the pound showing no signs of stopping, we will be paying close attention to the remarks by UK MPC member Tenreiro.