LONDON — Sterling was weaker against a robust dollar on Monday, hovering near last week’s 37-year low, with sentiment towards the British currency remaining weak given a darkening economic outlook.
Currency trade was generally subdued with London markets closed for the Queen’s funeral.
It’s a potentially big week for the battered currency given that the Bank of England is meeting on Thursday and new finance minister Kwasi Kwarteng is on Thursday or Friday expected to deliver his first fiscal statement with further details on an energy price cap and tax cuts anticipated.
While the Bank of England is expected to raise rates by at least 50 basis points (bps) this week, the prospect of further tightening has failed to shore up the pound. The Federal Reserve is also meeting this week and expectations for an even bigger hike of at least 75 bps has bolstered the dollar.
The pound was last trading at $1.1381, down about 0.5% on the day and within sight of the 37-year low hit on Friday at $1.1351.
Sterling was also a touch weaker at around 87.77 pence per euro, having touched its lowest levels since early 2021 on Friday at around 87.83 pence.
“The momentum is weak and the moves have been strong,” said Nordea chief analyst Jan von Gerich. “We should see a stabilization at some point, but it’s hard to say when that will come.”
Sterling is down roughly 16% against the dollar so far this year, putting it on track for its worst year since 2016 – when the Brexit referendum outcome roiled UK markets.
While sterling is not the only currency to have slid against the greenback this year, the pound had also been hurt by a bleak UK economic outlook.
Britain has the highest inflation rate among the world’s big rich countries but is also at risk of slipping into a recession.
(Reporting by Dhara Ranasinghe Editing by Mark Heinrich)