Among the most valued currencies today, the British Pound has been experiencing turbulence in the foreign exchange market. This Monday, 26 September, the British currency registered a sharp drop, obtaining the lowest historical level in relation to the Dollar. The pound fell 4,7% against the American currency, approaching an exchange rate difference of just U$ 1.
Nonetheless, this tuesday, 27 September, Libra is already operating at an all-time high again. For the currency to recover part of the devaluation, the Bank of England needed to reposition itself economically, stating that he would raise interest rates in the next meetings. Like this, the currency started the day with an appreciation of 1,09% to 1,080 against the American currency.
Tax cut package
The fall of the Pound was a market response to the tax cut package, announced on Friday, 23 September, by the UK Finance Minister, Quasi Quarteng. The package, estimated at £ 45 billion (R$ 257 billion), It's the biggest package of cuts in England in mid-century.
The current financial plan will be to pay off a huge English debt, in which Minister Kwarteng is expected to use a loan worth tens of billions of pounds to finance the package.
In addition to this issue, England will also allocate around £ 150 billions to subsidize energy costs for English consumers and businesses. The energy crisis has worsened across Europe as a result of the war between Ukraine and Russia.
Future of exchange rate uncertain
Despite the recovery of this last day, the forecast is that the Libra will remain oscillating and, even, devaluing. In the end, Minister Kwarteng ruled out the possibility of declaring an emergency interest rate increase.
The devaluation in comparison to the Dollar also has another aggravating factor. O Fed (Central Bank of the United States) has shown interest in maintaining its aggressive stance in order to combat inflation.
On Monday, inclusive, Loretta Master, the president of the Federal Reserve Bank of Cleveland, declared that the Central Bank should raise interest rates even further. For CEO, It is better to make a monetary mistake for more than for less.
