Pound Sterling hit a new low on Monday, triggering speculation of an emergency response from the Bank of England as investors retreated from Britain’s plan to borrow their way out of problems and rushed into U.S. dollars out of fear.
Concerns that high interest rates will stifle growth have weakened Asian currencies and stocks, wreaking havoc on exporters ranging from Japanese automakers to Australian miners.
The pound has dropped as low as $1.0327 at one time, surpassing 1985 lows, or about 5%. Despite falling back to $1.05 due to thinner liquidity in the Asian session, the euro is still down over 7% in just two sessions.
You’ve got to buy the dollar as a risk off-trade. There is nowhere else to go, “said Rabobank strategist Michael Every in Singapore.
Friday saw Wall Street close lower, and Asian markets started lower on Monday, following the trend. This week, traders will be eyeing a number of economic reports, including the US GDP and first jobless claims data, as well as Chinese PMI data.