by On Friday, the British pound was on course for recording a loss for the week, after the US Fed chairman, Jerome Powell, delivered a hawkish speech, which gave the US dollar a good boost.
Dollar-pound movements
There was a strengthening in the US dollar index after Jerome Powell asserted that a tight monetary policy would be maintained in the US economy for a while before they rein in inflation.
However, he did not provide any hints about the magnitude of the increase to expect in interest rates. In reaction to Powell’s speech, there was a fluctuation in the pound-dollar currency pair.
It declined to a low of one week at $1.1765. Sterling had lost 0.6% against the US dollar by 1627 GMT for the day to reach $1.177, which put it on course for a weekly loss of 0.5%.
There was a 0.7% rise in the euro against the British pound, as the currency pair was trading at 85.865 pence.
Investors of the British currency were also assessing the possible impact of a rise in the household energy bills in Britain by 80% from October.
They are expected to reach an average of 3,549 pounds a year, which is around $4,190.
Crisis in Britain
Ofgem, the regulator in Britain, said that the government needs to make decisive and urgent interventions for dealing with this rising crisis.
Inflation in the United Kingdom has climbed to a high of 40 years and the Bank of England (BoE) has already issued warnings of a lengthy recession.
There are bets that increasing costs will push the government into providing households more support. Market analysts said that long positions on the GBP have increased substantially in recent weeks by leveraged funds.
They said that one reason for that happening could be the expectation that the new UK prime minister would take forceful action in order to provide support to households.
However, they did add that this was a risky bet to make because it is uncertain what Liz Truss, who is considered the potential British prime minister, would do for households.
Expectations
Previously, Truss had said that she does not think that households should be helped with handouts in dealing with the cost of living crisis plaguing Britain.
Instead, she said that she preferred to offer them tax cuts. However, a spokesperson for her campaign said on Friday that she would ensure that people get the support they need in tough times.
The decision about the next prime minister of the UK would be made next month and only then would the policy expectations become clear.
As far as the monetary policy is concerned, the Bank of England (BoE) had already hiked interest rates by 50 basis points this month.
Along with hiking rates, it warned of a recession beginning at the end of this year and continuing till 2024. It is expected to hike rates yet again in its policy meeting scheduled for next month.
