Britain’s Pound Takes a Drastic Dip – It’s Feeling the Pressure
On Friday, the British pound fell to a fresh 37‑year low against the U.S. dollar, while it hit a 17‑month trough on the euro. The dip comes after retail‑sales numbers that didn’t meet expectations, leaving traders wary of the overall health of the U.K. economy.
Currency Swing Highlights
- Dollar Pair: 1.1351 per pound, the worst level since 1985. The pound’s slide has accelerated once it broke yesterday’s 37‑year low.
- Euro Pair: The euro weakened to 87.66 pence (£0.8766), a historic low since February 2021, before finding a small rebound to 97.52 pence.
Retail Sales – The Real Pacing Back
Overall sales dropped by 1.6% month‑on‑month in August, per the Office for National Statistics. That’s the steepest fall since December 2021 and exceeds forecasts from a Reuters poll of economists, which anticipated a 0.5% drop.
Short version: Brits are spending less, and that’s not a great sign for the pound.
Why the Stubborn Slump?
John Hardy, FX strategy lead at Saxobank, says:
“Sterling’s under pressure from a backlog of negative news. The U.K. runs huge external deficits, and the new prime minister’s policy gamble adds to the risk.”
And then there’s Liz Truss’s latest move:
- She announced a two‑year cap on soaring energy bills, in an effort to cushion the Ukrainian war cost shock. The cost could be a staggering 100 billion pounds.
- Finance Minister Kwasi Kwarteng will soon explain how this will be funded and how he plans to deliver the tax cuts Truss promised.
FedEx’s Forecast Withdrawal – A Market Shock
Meanwhile, FedEx Corp pulled its own forecast on Thursday, sending its shares plummeting and casting a shadow on broader markets. The “risk‑off” environment created by that announcement turned sterling into a “worse euro,” as Foley observed.
Bottom Line
With retail sales declining, a new government venturing into costly policy changes, and fatigue from the market’s risk‑off stance, the pound is pressed to a record low. The future? Only time and market sentiment will say for sure.
