Pound drops to a 37-year low against the US dollar

Daily Currency Update

The pound has hit a new 37-year low against the US dollar. Russia accused the West of nuclear blackmail raising fears that the Ukraine war could escalate. This added value to the US dollar due to its status as a safe-haven asset during risk climates. This was followed by the latest US Federal Reserve interest rate decision which saw their Bank Rate increase by 75 basis points and with their forward guidance indicating that they could raise rates by a further 125 basis points over their next meetings.

The money markets say there’s a 90% chance that the Bank of England will raise its Bank Rate by 75 basis points at noon today, to 2.5%, as it tries to manage soaring inflation. That would be its biggest rate increase since 1989 and take borrowing costs to their highest levels since late 2008, however, some economists think the bank might only raise rates by another 50 basis points, repeating last month’s move which was the biggest rise since 1995.

Today's focus will firmly be on the Bank of England rate decision at 12pm and if they can give any indication on forward guidance for future hikes.