13:00 Pound sinks to multi-decade lows as King Dollar reigns
Sterling has completed one of its steepest declines in memory by hitting its weakest level since 1985, excluding if you will the brief dive of the Oct 2016 'flash crash'.
This is the worst sustained period of sterling selling that I can recall, and it points to a severe dollar liquidity crunch that central banks have yet to get a grip on. There is a synchronised rush for dollars that has caught most companies, governments and traders on the hop. Dollar funding issues have been far more serious than estimated prior to this crisis.
However sterling is also sharply weaker against the euro in recent days, with EURGBP above 0.92, so whilst the main reason for the pound's decline, there are clearly other factors at work. The UK government's massive fiscal package undoubtedly means more borrowing for the UK economy - how do we pay for all this? And in a rather bizarre turn of events - if you have been schooled in the Eurozone sovereign debt crisis a few years back - the euro has developed certain safe haven characteristics. Sterling is, on the other hand, a bit of a proxy for risk. Concerns about what the implications are on Brexit from the coronavirus may also be a factor, whilst we have also seen a sharp downgrade of UK growth forecasts - but Britain is not alone on that front by any means. Brexit though clearly created risks (and opportunities) for GBP anyway and the threat of a global recession only magnify those risks for the market.
Therefore this seems to be an offloading of risky-ish pounds in favour of safer dollars and, to a much lesser degree, euros. Meanwhile the US dollar index has surged beyond 100 to hit its highest in three years, as EURUSD also comes under renewed pressure. In a crisis like this King dollar reigns supreme.
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