The spectacular collapse in the value of the British Pound over recent days has been all over the news and has represented a stark dip down after a sustained declining over recent months.
The downturn that took place this week was spurred on by the prediction by Citigroup analysts that the level of inflation in the United Kingdom could possibly approach 18% by January 2023, and the arrival at 1.18 against the US Dollar on Monday morning sent a stark warning to the markets that confidence levels are low.
Today, a further set of pessimistic criteria has been unleashed on an already weary national economy as JP Morgan, another Tier 1 investment bank which is among the leading Foreign Exchange interbank dealers alongside Citigroup has publicly aired its opinion that, should a domestic energy crisis occur in the United Kingdom this winter, the value of the British Pound may reach 1.14 against the US Dollar.
Should that come to fruition, it would place the British pound at its lowest value against the US Dollar in over 2 years.
During the course of 2022 so far, the British Pound has declined by a considerable 12% against the US Dollar and therefore is starting to reflect concerns that higher gas prices will fan inflation as economic growth contracts.
Energy prices have become a very important point among British households recently, and the predictions that the average energy bill per year per household could reach £5,000 by the end of this year whilst inflation and interest rate rises continue to run amok. This has created numerous protest movements across the United Kingdom, including large groups advocating for the mass non-payment of energy bills in order to send a message to the government and the energy companies that unsustainability and fuel poverty will not be tolerated.
This kind of unrest is very rare in the United Kingdom, and therefore demonstrates the magnitude of the cost of living crisis and only serves to continue to create a bearish sentiment in the minds of currency traders.
Most certainly volatility is back in the limelight among major currencies, and looks to be predictably with us for some time according to analysts in the major banks.
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