Sterling's massive rally this week is its biggest since the financial crisis
REUTERS/Lucy Nicholson
If sterling stays at its current level until the end of the week's trading later on Friday, it will have gained almost 3% against the dollar since markets opened on Monday, that would mark one of the ten biggest weekly gains for the currency against the greenback in the last decade, and the biggest since 2009, when Britain was recovering from the worst of the global financial crisis.
At around 2:30 p.m. BST (9:30 a.m. ET) the pound is off roughly 0.35% to just below $1.33, still on track for a record week. Here is how that looks:
Investing.com
Two key factors have helped push sterling to its best week in almost seven years: the appointment of Theresa May as prime minister, and the Bank of England leaving interest rates unchanged for an 88th straight month.
The pound charged on Tuesday after the confirmation that May was the new leader of the Conservative Party, and continued to rally when previous incumbent David Cameron stepped down from the post.
Markets reacted positively to the news of May's appointment, as it brings some semblance of stability back to the British political landscape, which in the last three weeks has witnessed a vote to leave the European Union, the resignation of Cameron, a Tory party leadership race, and a challenge against Labour party leader Jeremy Corbyn.
Then, on Thursday the pound soared over 2% on the news that the Bank of England would hold interest rates at 0.5% for the 88th straight month. Many in the markets had expected the BOE to cut interest rates to 0.25% in response to the June 23 Brexit vote, which governor Mark Carney previously warned will provide a substantial drag on the British economy.
The BOE's lack of action on rates was a big surprise, as such a move had been widely expected in the markets, with a survey in the Financial Times on Monday suggesting that markets had "already priced in a 75% chance of interest rates being cut from 0.5% to 0.25% this week." That helped give the pound a substantial push upwards.
Sterling took a hammering after the UK voted to leave the European Union, losing more than 12% of its value in a couple of trading sessions, and dropping down to the lowest level since 1985. While it has rallied since then, sterling still remains just over 10.7% down from $1.4897, where it closed on the day before the referendum result. Here is how that looks:
Investing.com
Predictions from substantial portions of the markets suggest that in the medium term, it is expected that the pound will likely continue to fall against most major currencies, with predictions of the currency's bottom ranging from $1.20 at Goldman Sachs, to $1.15 from Deutsche Bank, all the way to $1, a prediction made by former PIMCO executive Mohammed El-Erian.
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