British Pound Plummets to Record Low | Daily Market Analisys

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The pound hit a record low, and the collapse of British bonds worsened after the new government said it had not yet done away with unjustified tax cuts and energy subsidies. Italy is forming a new government after a bloc led by Giorgi Meloni's Brothers of Italy party won the national election. U.S. stock indices are trading with no single trend, with a focus on Amazon and eBay. Crude oil is getting cheaper because of the prospect of falling demand as the global economy slows. Here's what you need to know about financial markets today.

• British pound hits record low

The pound hit a record low against the dollar and fell against the euro and other currencies, while government bond yields soared, a shattering verdict on the new government's plans for tax cuts and energy subsidies.



GBP/USD chart

Britain's currency depreciated after the country's Treasury Department promised to keep cutting taxes, sparking fears that the new policy will lead to a sharp rise in inflation and the national debt. The pound's collapse was the biggest intraday drop since March 2020, when markets were panicked by the start of the coronavirus pandemic.

The sale of the currency began on Friday after the government announced a plan for large-scale tax cuts in the U.K., which will affect individuals and businesses and increase the budget deficit.

The move sent shockwaves through global bond markets because of fears that other advanced economies may abandon orthodox economic policies as they grapple with the effects of this year's energy price spike.

The effects of this crisis are also reflected in Germany's Ifo business confidence index.

• Meloni is about to form a new Italian government

The right-wing coalition led by Giorgia Meloni's Brothers of Italy party won the national elections, winning enough seats for a majority in both houses of parliament.

Italian bonds reacted with a moderate sell-off, with the key spread between 10-year Italian and German bond yields widening by just 4 basis points, while FTSE MIB was the only European stock index to rise despite events in the United Kingdom.



FTSE MIB chart

Concerns about Brothers of Italy going into the country's fascist past were mitigated - at least in the markets - by Meloni's promise of a responsible fiscal policy, freeing up tens of billions of euros in post-pandemic aid from the EU budget.

Nevertheless, there was a noticeable protest in the election: turnout was the lowest ever recorded, while parties that supported Mario Draghi's broad coalition government did particularly poorly.

• U.S. stock indices trade with no unified dynamics

U.S. stock indices traded without a single trend during Monday's session. The market remains concerned about the prospect of a recession in the global economy due to rapid interest rate hikes by the world's central banks to combat inflation, which is breaking multi-year records.



NASQAQ, SPX and DJI chart

In addition, risk assets are negatively impacted by the dollar rally, fueled by hawkish statements and actions by the U.S. Federal Reserve.

• Oil prices are down on fears of falling demand

Crude oil prices fell to a new nine-month low as a shake-up in bond and currency markets raised further doubts about the strength of the global economy and global oil demand.

U.S. crude futures fell 0.4% to $78.44 a barrel, and the price of Brent crude fell 0.5% to $84.63 a barrel.

The sentiment was hardly helped by signs of further economic stress in China, the world's biggest importer, where the central bank changed its reserve requirements to cushion the yuan's fall and the China Commercial Bank introduced a new fund to support troubled real estate projects.

 

• British pound
• Record Low
• NASDAQ