Pound weakens against Dollar and Euro on hawkish US Fed interest rates fears

The Pound Sterling weakened against the Dollar and the Euro after US Federal Reserve chair Jerome Powell’s comments at the Jackson Hole convention sent markets on both sides of the Atlantic into a spiral last Friday.

Investors fled stocks following Powell’s confirmation of probable further interest rate hikes to tackle sky high inflation. A single month of inflation reduction to 8.5% from 9.1% in July proved insufficient to sway the US Fed from its hawkish stance on rate hikes.

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Despite analysts long-expecting Powell to dismay hopes of a dovish sentiment, the markets still appeared significantly upheaved, knocking the Pound down against the Dollar and stirring remarks the currency might be on its way to parity, similar to the Euro earlier this month.

“[Will] forex traders be eyeing the possibility of parity between the pound and its US counterpart? A similar fate to that which befell the euro recently,” said AJ Bell investment director Russ Mould.

“It would take a big move to get there but as the energy crisis continues to grip the UK it doesn’t feel like a scenario where you could rule anything out.”

One pound was equal to 1.1743 US Dollars and 1.1715 Euros in early morning trading.

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