Yahoo Finance Pound hits new post-Brexit low as traders flock to safe haven dollar
The pound (GBPUSD=X) sank to its lowest against the dollar since December 2020 as investors rushed to safety as the Ukraine conflict deepens.
Sterling tumbled as low as $1.314, a level not seen since before Britain finalised its exit from the European Union. It is currently 0.6% lower to $1.315 at the time of writing.
The greenback is the favoured currency of the world at the moment as the Federal Reserve took a more hawkish stance, signalling an interest rate hike in March as inflation soars in the US.
Experts predict the pound is headed for a move towards $1.285 as the escalation of fighting in Ukraine and the prospect of a Russian energy embargo fuels worries that the war could push up inflation and dent global growth.
Sterling "looks to be heading back to the December lows at 1.3160, with a break below targeting a potential move towards 1.2850," said Michael Hewson, chief market analyst at CMC Markets. "Resistance remains back at the 1.3450 area."
However, the Bank of England (BoE) could provide some support for sterling as the central bank is expected to hike interest rates for a third consecutive time when it meets later this month.
The Federal Reserve (Fed) is highly likely to be aggressive with its monetary policy in its next meeting in March, which could further strengthen the dollar.
This is likely to be reinforced by the stronger than anticipated jobs number on Friday, which surged 678,000 last month, above the 423,000 forecast, as the labour market pushed further towards maximum employment.
Fed chair Jerome Powell said last week: "With inflation well above 2% and a strong labor market, we expect it will be appropriate to raise the target range for the federal funds rate at our meeting later this month."
Read more: Euro dips below $1.10 for first time since 2020
"I am inclined to propose and support a 25 basis-point rate hike," Powell added. "To the extent that inflation comes in higher or is more persistently high than that, then we would be prepared to move more aggressively by raising the federal funds rate by more than 25 basis points at a meeting or meetings."
Sterling's decline comes alongside losses for the euro (EURUSD=X), which last week fell below key levels to under $1.10 for the first time since May 2020, after reports that Europe’s largest nuclear power plant was attacked by Russian shelling.
The pound rose 0.4% to €1.214 against the euro (GBPEUR=X), and was up 0.3% against the Swiss franc (GBPCHF=X), another safe-haven in times of economic trouble.
An escalation in conflict and a potential ban on Russian crude have sent fresh shockwaves through commodity and financial markets, pushing investors to safe-haven assets.
Gold prices (GC=F) neared all-time highs last seen at the start of the coronavirus pandemic as investors flocked to the safe haven instead of other assets. Spot gold rose 1.7% to $2,000 per troy ounce.
Read more: Oil price hits $139 as UK and US consider banning Russian crude
Oil prices surged to the highest level since 2008 as Britain and the US consider banning oil imports from Russia as the Ukraine war intensifies.
Brent crude oil (BZ=F) jumped to a 14-year high on Monday, rising to as much as $139 (£105.12) a barrel. This is about $8 below the all-time record of $147.50 set in July 2008.
