Pound falls to 37-year low on Black Wednesday anniversary

The pound banknotes are visible in this example taken on March 1, 2022. Reuters/Dado Ruvik/Illustration/File photo

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LONDON, Sep 16 (Reuters) – Sterling marked the 30th anniversary of “Black Wednesday” after hitting a 37-year low against the US dollar on Friday and a weaker-than-expected 19-month low against the euro. Retail sales figures reinforced fears about the UK economy.

The pound fell more than 1% to $1.1351 against the dollar, its lowest since 1985, and was last trading at $1.1404.

Most major currencies have struggled against the dollar in recent months, and the greenback was given another leg-up this week, as US inflation warmed by a warmer-than-expected demand from the Federal Reserve next week in markets for another big deal. The rate was increased. read more

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The pound has particularly struggled, however, and the euro hit a high of 87.71 pence on Friday, its highest level since February 2021. It was up 0.39% at 87.45 pence.

On 16 September 1992, Britain pulled out of the exchange rate mechanism – a system designed to reduce currency volatility prior to the euro’s launch – leading to a sharp devaluation of the pound.

On that day, now known as Black Wednesday, sterling fell 4.3% to end at $1.778, well above today’s levels.

Friday’s decline followed data that showed retail sales volume slipped 1.6% in monthly sales in August – the biggest drop since December 2021 and worse than all forecasts in a Reuters poll of economists, which showed a 0.5 percent drop. indicated a decline of %. read more

It was the latest bad news for the British economy, which is facing slower economic growth and more persistent inflation next year than any other major economy, the International Monetary Fund forecast.

John Hardy, head of FX strategy at Saxobank, said: “The grinding background of what is going on is weighing on sterling, adding to the risks surrounding these massive external deficits and the policies of the new prime minister. “

Britain’s new leader, Liz Truss, last week announced a cap on consumer energy bills for two years to ease the economic shock of the war in Ukraine, which has cost the country upwards of 100 billion pounds ($115 billion). is likely to. read more

British Finance Minister Quasi Quarteng is due to make a financial statement on 23 September, to explain how it will be funded, and is also expected to say what was done by Truss during his campaign for leadership of the Conservative Party. How will you meet the tax deduction? read more

“Furthermore, markets are “risk-off” after FedEx withdraws its forecast, and US equities are falling below a key support level, Foley said. In a risk environment, sterling is like the bad euro. “

FedEx Corp. on Thursday withdrew its financial forecast it issued just three months ago, causing its shares to fall and weighing more broadly in the markets. read more

The Bank of England meeting will take place next week, part of a week filled with central bank meetings. Market pricing indicates a slightly higher probability of a 75-basis-point increase than a 50-basis-point jump. 0#bowatch

MUFG said, “Given the (European Central Bank) increase of 75 bps, as did the Bank of Canada and as did the Fed and possibly (Swiss National Bank), will certainly drive further GBP selling.” There is a risk of an increase of 50 bp to boost.” A Comment.

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Editing by Sherry Jacob-Phillips and Toby Chopra

Our Standards: Thomson Reuters Trust Principles.

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