A pound could be worth a dollar in 2022

Key Takeaways:

  • Sterling falls to a record low of $1.035 against the US dollar.
  • Can the GBP fall below parity with the greenback?
  • Dollar's soaring index left the Asian currencies behind.
A pound could be worth a dollar sooner or later
A pound could be worth a dollar sooner or later

YEREVAN (CoinChapter.com) – The British Pound dropped to a record low on Sep. 26, nearly reaching parity with the US dollar.

The slump followed the UK government dishing out tax cuts and investment incentives to boost growth while attempting to stave off recession. As a result, the pound briefly fell 4% to an all-time low of $1.035 on Monday and fluctuated to $1.07 hours later.

GBP/USD daily chart. Source: TradingView.com
GBP/USD daily chart. Source: TradingView.com

Pound seeks parity with dollar

Several experts agree that the governmentally imposed measures to fight the approaching recession would ultimately disproportionally benefit “the wealthy.”

Mazen Issa, the senior forex strategist at TD Securities, commented on the GBP/USD exchange rate and the possible fall below parity.

[It] doesn’t seem like the U.K. government is throwing the market a bone in terms of having a more tempered fiscal trajectory, and so I think at this point right now, the path of least resistance is going to remain lower. We’ve seen the euro dip below parity — I don’t see a reason why sterlings can’t either.

the strategist said.

Moreover, Nicholas Ferres, chief investment officer at Vantage Point Asset Management, called the Bank of England’s efforts to simultaneously fight inflation and stimulate the economy a “major challenge” and hinted at a possible emergency policy meeting this week to hike interest rates.

Asian markets follow

After the US Federal Reserve’s hawkish approach, the greenback soared against the global currency basket, sending GBP, Yen, Yuan, and others to join the euro.

US dollar index (broad dollar) daily chart. Source: TradingView.com  sterling GBP
US dollar index (broad dollar) daily chart. Source: TradingView.com

According to the charts, China’s yuan also slid 0.4%, which prompted the People’s Bank of China to impose a reported “risk reserve requirement of 20% on banks’ foreign exchange forward sales to clients starting Wednesday,” In a nutshell, the decision made it more expensive for traders to acquire foreign currencies via derivatives, which could hinder yuan’s declines.

Also read: Bitcoin and bros set to finish another September in losses

The Japanese Yen followed suit, dropping 0.6% against the greenback. The decline prompted the Japanese Central Bank to intervene by buying Yen and selling dollars for the first time since 1998. The crutches worked temporarily, but the currency resumed the slide on Sep. 26.

The Korean won also plunged 1.6% on Monday, assuming its lowest level since 2009.

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