Sterling softens after UK PM Truss speech
Britain’s pound weakened against the dollar today, ending a six-day rally but avoiding recent lows as British Prime Minister Liz Truss sought to overcome a chaotic first month in office with her speech to the annual Conservative party conference.
Truss urged Conservatives to stick together and help transform the economy and the country, as she fights to restore her dwindling authority.
The selloff in the British pound meanwhile gathered pace as the dollar rallied across the board – pushed up as recent risk-on sentiment reversed and Wall Street shares slid.
In late trade, sterling was at $1.1266, having slid as much as 2%, but holding above recent record depths. The euro was also down over 1% against a broadly firm greenback.
“The dollar is exerting its dominance on the currency markets once again as sterling/dollar and euro/dollar are down by 1.9% and 1.3% respectively,” said David Madden, market analyst at Equiti Capital.
Against the euro, the pound was down 0.5% at 87.53 pence.
After tumbling to a record low of $1.0327 against the dollar last week in the aftermath of the government’s “mini-budget” announcement, the pound has recovered some ground. It was also boosted on Monday after the government reversed a planned cut to the highest rate of income tax.
“Compared to the wild swings over the past week or so it’s not a significant move,” said Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown, referring to the pound’s performance.
Sterling got a small uplift after the final S&P Global UK Composite Purchasing Managers’ Index came out slightly higher than first estimated.
Despite the slightly better reading, the data brings into focus the challenges facing British businesses as they suffer the sharpest contraction in activity since early last year.
Amid recession fears and concerns around UK fiscal policy, the pound is down 16.5% versus the dollar so far in 2022.
Meanwhile the dollar has been rising as the US Federal Reserve hiked interest rates aggressively to control inflation.
The Bank of England is also battling to corral soaring inflation, with the market expecting a bumper hike of 100 basis points at its next meeting in November.