The pound sterling is still recovering from its recent plunge versus the greenback. In early September, the currency collapsed to levels unseen since 1985. Although the bear run has stopped, the pound is still struggling to recoup losses.
The British currency is now hovering around $1.179, not far from its 1985 low. On September 5, the pound traded at $1.144 in early trading in Asia. However, the currency then retraced up and settled at $1.1503 from the previous close at $1.1507 by the middle of the day. Many traders hoped that the sterling would extend growth when the name of the new prime minister was announced. Still, the currency barely showed any reaction to the news about Liz Truss winning a Conservative Party leadership election and becoming the UK’s next prime minister.
According to forex experts at The Wall Street Journal, there are two factors now weighing on the pound – the stronger US dollar and the current state of the British economy. If energy woes deepen, the sterling is doomed to extend its bear run and slide to its 200-year low against the greenback. Goldman Sachs expects the British economy will slip into a recession in the fourth quarter of 2022, with the risk that it could turn out to be a deeper contraction. The country’s GDP is estimated to decrease by 1% by mid-2023.
