The GBPUSD currency pair was trading down over 127 pips as demand for the US dollar soared amid market turmoil created by the US banking crisis that has now spread to European banks such as Credit Suisse, which many fear could be in trouble given its recent past.
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The budget statement rent by Jeremy Hunt had minimal impact on the currency pair despite reassuring investors that the UK would technically avoid a recession with the country’s economy contracting by a mere 0.2% in 2023.
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The government also predicts that UK inflation will fall to 2.9% by the end of 2023 from 10.7% at the start of the year, which would be a significant win for the Conservative Party. The government also extended the £2500 energy price guarantee energy price cap guarantee for another three months.
The Chancellor of the Exchequer further extended the freeze on fuel duty for another year while extending the 5p price cut on diesel and petrol to cushion consumers. The British government also reclassified nuclear energy as ‘environmentally sustainable’ to allow the industry to attract the same investment incentives as renewable energy projects.
The GBPUSD currency pair kept falling as I wrote this article, as investors remained fearful that the global economy could be on the brink of another financial crisis led by the banking sector following the collapse of Silicon Valley Bank and Signature Bank.
Investors bought the US dollar due to its safe-haven status as the world’s sole reserve currency, which all other currencies are measured against. However, the Swiss National Bank’s reluctance to reassure investors of Credit Suisse’s stability sent a warning signal that all may not be okay at the bank.
European banking stocks fell today as fears regarding Credit Suisse and the region’s banking sector saw investors dump banking stocks en masse as they fear that the situation will worsen over the coming days.
The GBPUSD’s decline was replicated in most currency pairs as the US dollar dominated other currencies. It is too early to tell if there will be no further bank failures. Investors should keep a close eye on baking stocks going forward.
*This is not investment advice.
The GBPUSD price chart.
The GBPUSD currency pair was trading down 127.5 pips (1.05%) as the US dollar rallied against the sterling pound.
YOUR CAPITAL IS AT RISK. 76% OF RETAIL CFD ACCOUNTS LOSE MONEY.