The pound tumbled to an all-time low and president of ECB comments on monetary affairs in parliment.

Analysts predicting that sterling will drop below $1

The outsiders are placing their bets on the pound dropping to parity with the dollar or even less. After it dipped earlier this morning to as low as $1.035, setting s new all-time low, traders expect it to keep falling. According to Bloomberg, risk-reversal contracts show an almost 60% chance that it will hit $1 before this year is finished.

The currency already felt the pressure by the steady rise of the dollar due to higher energy prices and the hikes of Fed’s rates, bringing more cash towards the US. But the continuous strain intensified when the new PM announced its plans to sanction large scale tax cuts during an economic crisis. This might force policy makers at BoE to raise interest rates even further.

Towards the end of the trading day, sterling was down 1.5% against the dollar at about $1.07. The last time we have seen the pound approach $1 was back in 1985, before the major world powers united to drive down the value of the dollar. Several strategist target $0.975 by the end of the year for the pound (investing.com).

Lagarde speaks on the European Parliament

Current inflation remains too high and is likely to stay above the target of EU parliaments for a little longer than planned. Hence, governing council took a big step to frontload the transition from existing levels of policy rates, towards a level that will ensure the return of inflation to the 2% medium-term target (ecb.eu).

The euro zone economy grew by 0.8% in Q2 of 2022, mainly due to strong consumer spending on services when economy reopened (ecb.eu). Nations with large tourism sectors benefited the most as people travelled more over summer, which makes sense. However, such activity is expected to substantially slowdown in the upcoming quarters. The high inflation rates, fading demand for services and tighter monetary policies in major economies, is a difficult challenge says the President of ECB (ecb.eu). Investors are struggling to digest everything, and fears are deepening.