The latest news on the value of the British Pound (GBP) shows a slight fall in the value but the recent news on the value of the Bank of England’s bond market suggests a more significant fall. The British Pound is down about one percent in the last twenty-four hours and has fallen by half a point in the past hour. GBP/USD is showing further volatility and this could well lead to further fall.
The latest news on the value of the Bank of England’s bond market suggests a further fall in the value of the British Pound (GBP). The cost of borrowing against a bond is based on the current market value of that currency. When the price of that currency drops it causes a fall in the cost to borrow against that bond. The last time this happened was in 2020 when the value of the GBP lost almost half a trillion dollars overnight in the largest financial crash in history.
In addition to this the FTSE Index is also falling. The FTSE has fallen from its all time high of 7,500 on April this year to a recent low of 6,200 in the last two days. The British Pound is not alone in falling against other major world currencies. It is not surprising to see the GBP weaken against other major currencies like the US Dollar, Japanese Yen, German Mark and Swiss Franc as a result of this recent run of global economic uncertainty.
However, there are warning signs that suggest that the latest fall in the value of the GBP might continue and that a further fall in the value of the UK Pound could soon follow. These signals include:
The cost to borrow against UK Bonds: The cost to borrow against a specific bond depends on its current market value. If the value of that bond falls then you have to pay more for borrowing. There is a simple reason why this happens. The FTSE Index and other global financial indices are based on the value of currencies. If the value of a particular currency depreciates then it makes it harder to borrow against that currency.
Latest: GBP/USD Will Likely Fall Further, FTSE Down} FTSE Index: Whilst we cannot say that the current fall in the value of the FTSE Index is directly connected to the fall in the value of the British Pound we do have some evidence that it is closely related. There are many signs that indicate the two are linked.
Latest: GBP/USD Will Likely Fall Further, FTSE Up | recent economic report} The recent economic report released by the Bank of England and the Financial Services Authority revealed that unemployment rose for the third month running and this followed news that showed inflation rose. This implies the UK is facing the worst recession since the 1930s.
Latest: GBP/USD Will Likely Fall Further, FTSE Down} The Financial Times has reported that Britain has been hit by “uneven trade” with the country losing half its export earnings in the first two months of the year. This is because of a fall in demand for exports from the Eurozone. Many countries in the European Union have recently made it compulsory for businesses to produce more goods and services for the Eurozone market. This means that the amount of goods that can be exported from the UK to the European Market is going down.
Latest: GBP/USD Will Likely Fall Further, FTSE Down} It is likely that the Bank of England’s latest interest rate cut will have a knock-on effect on the value of the British Pound. The most likely outcome of this is a further rise in the price of the pound. Many analysts and investors believe the Bank of England may cut the base rate to the lowest level in six years. as a result of the current global economic situation.
Latest: GBP/USD Will Likely Fall Further, FTSE Up} So we have seen some signs that the UK is set for a further fall in the value of the pound, but the question remains whether or not it will be enough to stop further falls in the value of the Pound. However, we expect further rises in the value of the Pound as investors continue to expect a future rise in the price of the Pound.