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A little bit of hope for the British Pound


This morning, the British Pound made an interesting change of direction as it made a very slight upward move in value against the US Dollar during the early hours of the trading day in London this morning.

Currently, the GBPUSD pair is trading at 1.16 which is a mild upturn in fortunes for the beleaguered British Pound, whose value has been languishing for a long period of time, culminating in a total drop-off on Friday last week which it has not recovered from.

The mild upward movement this morning has demonstrated a slight change in mood toward the British Pound, however there is still a very long way to go before it is anywhere near its 1.23 valuation at the beginning of August.

The geopolitical backdrop to this slight upward movement for the Pound indicates a potential looming blow for the British and mainland European economies, however, as recent news around the stoppage of gas flows via a major pipeline to Europe has stemmed fears around an impending energy crisis.

With the cost of energy already extremely high and continually rising in the United Kingdom, this is certainly news which is likely to focus the concentration of many traders and analysts.

The Bank of England already faces a tough challenge as recessionary expectations in the fourth quarter of this year mount however money markets have increased their interest rate bets for the September meet roughly 4 base points from Monday this week. A 75 base point hike remains possible, however there is some degree of sentiment which suggests that the Bank of England may not continue to make steep rate increases throughout the winter as domestic consumers face energy bill difficulties.

This level of unpredictability within the FX majors, especially the Euro and British Pound against the US Dollar is interesting, and represents a diversion from the two decades of almost non-moving currency markets.

The fiat currency landscape and the approach by central banks is very different today to how it was just two years ago and volatility is very much part of the remit.

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