A toxic cocktail of sluggish growth and high inflation, plus Brexit and fallout from the COVID-19 pandemic, is set to weigh on the British pound in the coming months, economists said.
Since the beginning of this year, the pound sterling has fallen by more than 7 percent against the US dollar, which is benefiting from rises in interest rates.
The pound has also fallen by 1.7 percent against the euro since the beginning of this year.
This comes despite the Bank of England having raised UK borrowing costs four times this year to fight inflation.
By contrast, the European Central Bank is waiting until July to raise its key interest rates for the first time in more than a decade.
British rate rises have “been insufficient to offset the headwinds weighing on the pound,” Rabobank analyst Jane Foley said. “Concerns about growth have been central to the poor performance of the pound.”
Fears of recession in the UK and elsewhere are gaining momentum as soaring inflation — fueled by rocketing energy prices — is affecting investment and consumer spending.
Oil and gas demand has surged as economies emerge from lockdowns, while supplies have been hit by the invasion of Ukraine.
Britain’s annual inflation rate stands at 9 percent, a 40-year high, while the Bank of England is forecasting the UK economy to contract at the end of the year.
The bank’s next rate decision is due on Thursday, when it is expected to raise its main borrowing cost above 1 percent.
“Hiking rates against a sharply slowing economy is never a good look for any currency,” Bank of America currency strategist Kamal Sharma said.
Whatever the financial cost of Brexit, “underpinning the market’s concerns about growth was the recent IMF projection that the UK is set to have the slowest pace of growth in the G7,” Foley said.
Other global financial bodies, such as the Paris-based Organisation for Economic Co-operation and Development, have also slashed growth outlooks for Britain, as well as for other major economies.
In Italy’s storied gold-making hubs, jewelers are reworking their designs to trim gold content as they race to blunt the effect of record prices and appeal to shoppers watching their budgets. Gold prices hit a record high on Thursday, surging near US$5,600 an ounce, more than double a year ago as geopolitical concerns and jitters over trade pushed investors toward the safe-haven asset. The rally is putting undue pressure on small artisans as they face mounting demands from customers, including international brands, to produce cheaper items, from signature pieces to wedding rings, according to interviews with four independent jewelers in Italy’s main
Japanese Prime Minister Sanae Takaichi has talked up the benefits of a weaker yen in a campaign speech, adopting a tone at odds with her finance ministry, which has refused to rule out any options to counter excessive foreign exchange volatility. Takaichi later softened her stance, saying she did not have a preference for the yen’s direction. “People say the weak yen is bad right now, but for export industries, it’s a major opportunity,” Takaichi said on Saturday at a rally for Liberal Democratic Party candidate Daishiro Yamagiwa in Kanagawa Prefecture ahead of a snap election on Sunday. “Whether it’s selling food or
CONCERNS: Tech companies investing in AI businesses that purchase their products have raised questions among investors that they are artificially propping up demand Nvidia Corp chief executive officer Jensen Huang (黃仁勳) on Saturday said that the company would be participating in OpenAI’s latest funding round, describing it as potentially “the largest investment we’ve ever made.” “We will invest a great deal of money,” Huang told reporters while visiting Taipei. “I believe in OpenAI. The work that they do is incredible. They’re one of the most consequential companies of our time.” Huang did not say exactly how much Nvidia might contribute, but described the investment as “huge.” “Let Sam announce how much he’s going to raise — it’s for him to decide,” Huang said, referring to OpenAI
Nvidia Corp’s negotiations to invest as much as US$100 billion in OpenAI have broken down, the Wall Street Journal (WSJ) reported, exposing a potential rift between two of the most powerful companies in the artificial intelligence (AI) industry. The discussions stalled after some inside Nvidia expressed concerns about the transaction, the WSJ reported, citing unidentified people familiar with the deliberations. OpenAI makes the popular chatbot ChatGPT, while Nvidia dominates the market for AI processors that help develop such software. The companies announced the agreement in September last year, saying at the time that they had signed a letter of intent for a strategic
RSS