Sterling Snowballing

Since the “flash crash” on Sunday evening the pounds losses have started to snowball, gathering pace as the days roll on.

Yesterday was another day we saw value wiped off the pound as sterling dropped nearly 2 cents against the US dollar, reaching fresh multi decade lows for those looking to send money to the States or companies buying from the Far East. On the flip side, those lucky enough to be working in the Middle East, US or off shore and paid in dollars have enjoyed a rather nice pay rise recently!

Against the single currency, the pound has faltered and gained back again but yesterday was another day of losses and it slid nearly a cent down, with the interbank, non-tradeable “mid-rate” pushing towards the key level of 1.10. The expectations were for this to be the potential trading area toward year end, but the algorithm anomaly over in Asia recently brought it round much earlier, with most analysts’ expectations for the pound versus single currency to be heading toward parity as the year end draws close. So anyone with a euro payment to make instead of putting a decent rate on your Christmas list this year, it might be more prudent to contact one of the Currency Index team today and talk to us about booking your transfer on a forward contract, taking any further risk out of the transaction.

Elsewhere, another huge drop came for the South African Rand yesterday as it emerged the Finance Minister Pravin Gordhan had been issued a summons to appear at court to face fraud charges as accusations of misconduct come back to haunt him from a decade ago when he was in charge of the countries tax collections. The resulting turmoil sent the Rand plummeting 3.5 percent over the day. Despite saying the allegations are totally unfounded, he will face a grilling in court on November 2nd, so we might see further rate volatility over the coming weeks.

Not that markets are taking much notice of the ecostats presently but today we have a couple of items to note. Firstly the German whole price index was released early this morning, while later this evening sees the release of the FOMC minutes from the last Fed interest rate meeting, which could shed some more light on the expected time line for another interest rate hike in the States. Anything hinting of an imminent on, will almost certainly spell further disaster for the pound as the strong dollar is coming at the expense of sterling selling.