The sterling saw its fortunes against the euro take the turn for the worst as investors scampered for the 19-nation currency amid a global rout in stocks and commodities markets. The British currency touched its lowest point in over three months versus the euro, but advanced to a two-month high versus the U.S. dollar.
The pound slid 1.8 percent to trade at 73.86 pence per euro at 4:25 p.m. in London trading, up from 74.23 pence, its lowest mark since May 7. The currency advanced 0.2 percent to touch $1.5732, after reaching $1.5803, its strongest level since June 23.
“Sterling is being led by the euro,” Jane Foley, a London-based senior currency strategist at Rabobank International, told Bloomberg News. “Euro-dollar is significantly higher and this is an unwind of the euro shorts,” she said, adding that the BOE “might have more difficulty hiking interest rates in this environment.”
China’s move to devalue the yuan led analysts to question the state of the nation’s economy, causing the country’s stocks to record their steepest decline since 2007. This trend quickly spread into the international stock markets, and pushed global commodities index to its lowest level in 16 years.
The current global equities market turmoil may cause central banks, such as the Federal Reserve and the Bank of England, that are mulling whether to raise interest rates to be more cautious. The benchmark interest rate in England has remained at 0.5 percent since 2009, the lowest level on record.
The 2 percent gilt that matures in September 2025 saw its yield tumble three basis points to 1.79 percent, while its prices increased by 0.255 to 101.915. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
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