Hawkish Central Banks Smash Pound and Aussie Dollar
(26 September 2022 – Global) The Great British Pound (GBP) and Australian Dollar (AUD) plunged as global markets capitulated in response to steep rate rises across the globe.
GBP/USD has fallen below $1.08 as trading reopens in Asia and selling intensifies in response to new Prime Minister Truss’s largest tax cuts in five decades. Chancellor Kwarteng announced broad sweeping economic and tax reforms as part of a significant treasury restructure. British interest rates are predicted to hit a high of 5.2 percent by August 2023 as the Bank of England (BoE) struggles to reign in double digit inflation. Sterling has depreciated to a fresh 37-year low versus the US dollar and the all-time low of $1.05 is fast becoming a real possibility.
The Aussie Dollar is now trading at the lowest level in over two years as reserve banks across the globe sharply tightened monetary policy, led by the US Federal Reserve. The value of global bonds has plunged by another US$1.2 trillion this week, bringing the total loss from the 2021 all time high to US$12.2 trillion. The value of financial wealth' slashed from debt capital markets, credit, equity and crypto markets since the 2021 peak is now estimated at almost US$30 trillion.
“Central banks have raised rates over the last six months to try and lower inflation but the most recent run of larger-than-usual hikes have caused markets to become less hopeful for a so-called ‘soft landing’” commented Convera APAC Currency Strategist, Steven Dooley.
“The Aussie was pressured by falling commodity prices with crude oil down 5.6 percent and copper down 3.6 percent on Friday” Dooley added.