Sterling’s trauma raises fears of contagion amid global withdrawal of capital
Market experts fear that continued inflation and poor growth mean that many currencies are vulnerable to the pressure that the UK has seen recently.
Recent FX market volatility may have focused on the yen and particularly the pound, but a number of other currencies will find themselves in the firing line during the coming months.
Deutsche Bank recently suggested that the UK’s predicament has to be viewed in the context of a large global withdrawal of capital. An improvement in global risk appetite would almost certainly help the pound, but the bank is concerned that with one of the largest bond markets in the world having experienced a foreign buyers’ strike, markets may ask which country is next.
Inflation remains an issue, as well as domestic growth. Both of these are global themes that are seeing the USD rise in strength
The pound has undoubtedly been in a particularly precarious position, but the majority of currencies can be seen to be in the same boat, according to Charlotte Hampshire-Waugh, global head of trading payments & FX at StoneX Financial.