IOPList.Org

Pound falls to 37-year low
on anniversary of Black Wednesday







LONDON, Sept 16 (Reuters)

Sterling marked the 30th anniversary of "Black Wednesday" by falling to a fresh 37-year low
against the U.S. dollar on Friday, and a 19-month trough against the euro, after weaker-than-
expected retail sales figures reinforced fears about Britain's economy.

The pound fell more than 1% against the dollar to $1.1351, its lowest since 1985, and was
last trading at $1.1404.

Most major currencies have been struggling against the dollar in recent months, and the greenback
was given another leg-up this week after hotter-than-expected U.S. inflation caused markets to
price in a further large rate hike from the Federal Reserve next week. Read More

The pound has particularly struggled, however, and the euro rose to as high as 87.71 pence on Friday,
its highest level since Feb 2021. It was last up 0.39% at 87.45 pence.

On Sept. 16 1992, Britain crashed out of the Exchange Rate Mechanism - a system designed to reduce
currency fluctuations ahead of the launch of the euro - causing a sharp devaluation in the pound.

That day, now known as Black Wednesday, saw sterling fall 4.3% to finish the day at $1.778 ,
well above today's level.

Friday's drop followed data that showed retail sales volumes slipped 1.6% in monthly terms in
August - the biggest fall since December 2021 and worse than all forecasts in a Reuters poll of
economists that had pointed to a 0.5% fall. Read More

This was just the latest bad news for the British economy, which faces slower economic growth and
more persistent inflation than any other major economy next year, the International Monetary Fund forecasts.

"The grinding backdrop of everything that's going on is weighing on sterling, with the UK running
these massive external deficits and the risks around the new prime minister's policies adding to that,"
said John Hardy, head of FX strategy at Saxobank.

Britain's new leader, Liz Truss, last week announced a cap on soaring consumer energy bills for two
years to cushion the economic shock of war in Ukraine with measures likely to cost the country
upwards of 100 billion pounds ($115 billion). Read More

British finance minister Kwasi Kwarteng is due to make a fiscal statement on Sept. 23 to explain how
this will be funded, and also is expected to say how he will deliver the tax cuts promised by Truss
during her campaign for leadership of the Conservative Party. Read More

"In addition, markets are "risk-off" following Fedex's withdrawing its forecast, and U.S. equities dropping
below a key support level. In a risk-off environment, sterling is like a worse euro," said Foley.

FedEx Corp on Thursday withdrew the financial forecast issued just three months ago, sending its
shares plunging and weighing on markets more broadly. Read More

The Bank of England will meet next week, part of a packed week of central bank meetings. Market
pricing indicates a slightly higher chance of a 75-basis-point hike than a 50-basis-point jump.
0#BOEWATCH

"Given the (European Central Bank) hiked by 75bps, as did the Bank of Canada and as will the Fed
and possibly the (Swiss National Bank), there is certainly a risk of a 50bp hike fuelling further GBP
selling," said MUFG in a note.



Editing by Sherry Jacob-Phillips and Toby Chopra