Sterling And Ruble Holding Steady Against The Dollar

On Wednesday, the Sterling was holding steady against the US dollar, above the low of two and a half years that it had reached a day earlier.

This was after data added to indicators that the British economy could be facing a recession soon.

The pound’s movements


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The British pound remained flat against the US dollar by 0840 GMT at $1.1829, after it had recovered some of its losses in early trading.

This was because there were not many new catalysts that could guide direction. Sterling had come down to its lowest value against the dollar since March 2020 on Tuesday.

This was after the purchasing manager’s index (PMI) data showed that the private sector growth in Britain had slowed significantly in August.

This was because of a decline in factory output and only a modest expansion was seen in the larger services sector.

The figure only added to indications that there would be a contraction in the British economy. Worries about the declining economy and soaring inflation in Britain has pummeled the British currency.

Last week, the pound suffered from its biggest weekly decline against the US dollar since September 2020.

Warning

There has already been a warning from the Bank of England (BoE) about Britain falling into a recession by the end of the year, which it expects to last until 2024.

This is because a rise in energy prices is expected to drive inflation beyond 13% in the month of October. Therefore, analysts said that it was difficult to make a strong case for buying the pound.

They said that starting a bullish case for it was just too soon and it was likely to happen in the fourth quarter if there is some support from the fiscal policy and the Fed changes its pace.

There was a 0.1% rise in the pound against the euro to reach 84.12 pence. The latter is dealing with its own issues, as data showed that business activity had contracted in the euro zone for the second consecutive month.

Ruble easing

Meanwhile, the Russian ruble saw some easing on Wednesday but was still trading close to 60 against the US dollar, as month-end tax payments gave it some support.

But, there was a decline in Russian stock indexes. A 0.3% drop was recorded in the ruble by 0737 GMT to reach 60.10 and it saw 0.2% easing against the euro to 59.69.

Analysts said that the dollar and ruble pairing had been between the 57 to 61 ranges for almost one and a half months.

The Russian currency has stopped strengthening and it appears that the two have hit a supply and demand equilibrium.

Up till now, the ruble has been the best-performing currency, after it had initially seen some volatility when Russian military forces invaded Ukraine back in February.

But, capital controls have kept the wild swings at bay, after the ruble reached a record low of 121.53. In June, the currency rallied to 50.01, which was a peak of seven years.


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