Redwood: Not in Government power to control pound

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A chart from a trading platform has shown how much Sterling has lost strength against the world’s leading currencies. Prime Minister Liz Truss and Chancellor Kwasi Kwarteng plan to borrow money to fund the £45billion tax cut announced on Friday, alongside a bailout for energy companies costing around £60billion. After the Chancellor’s “mini-budget” on Friday, the Pound dropped in value to a record low. 

TradingView, charting platform and social network, posted a graph on Twitter which shows the strength of world currencies throughout 2022.

It charted the American, Canadian and Australian Dollars, as well as the Euro, the Pound and the Yen.

The US Dollar has surged over the year, and near 9.11am UTC on Wednesday had seen 22.42 percent growth in strength over the year period. 

Over the same period, the British Pound had fallen to the second lowest with a drop of 22.38 percent.

The chart says the strength of the Japanese Yen has plummeted the most in the year period, with a fall of 23.38 percent.

However, the Pound saw the largest drop in strength, with the currency falling to $1.03 early on Monday before regaining some ground to stand at $1.08.

On TradingView’s website, they hold that the value of the Pound relative to the US Dollar is at $1.081 as of 10.07am on Thursday.

The website’s technical analysis ratings, which combine the ratings of several technical indicators, said, in brief, the Pound is currently rated as a “sell”.

According to TradingView’s moving averages, a stock indicator which creates a constantly updated average price, the Pound is a “strong sell” against the US dollar.

Currency traders said they were concerned by Mr Kwarteng’s announcements as according to the Institute for Fiscal Studies think tank, Government borrowing is expected to rise to £190billion in 2022 and to around £100billion a year for the next four years.

Trader-turned-market-commentator Neal Kimberley told i that if Government policy leaves an open goal for speculators to cash in, then “it is their duty” to take profit for themselves, their clients, and their employers.

He said: “If the Government initiates policies that effectively throw sterling under a bus, then it shouldn’t be too surprised if it goes down in value. 

“I’m surprised that they were surprised that happened.”

One senior manager working at an international bank in London said the “scorched earth” policy of Ms Truss and Mr Kwarteng was always going to lead to a run on the pound, as well as a sharp rise in yields on Government bonds.

They added: “It’s just that everyone knows it’s a s*** idea, which will need to be funded by borrowing and there’s not enough demand for government debt, so the price is plummeting.”

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