The exchange rate of the pound against the yuan finally broke 9 again, hitting a new high in the past two years.
Since last week, the pound exchange rate has continued its strong upward trend for nearly three months, and has risen to a new high in nearly two years against the yuan, reaching 1 to 9.13.
GBP 6-month chart ↑
Pound 5-year chart ↑
So, did you know the reason behind these sharp increases?
1. The Fed stops raising interest rates
In fact, a large part of the recent performance of the pound is due to the difference between the monetary policy of the Bank of England and the Federal Reserve in June.
According to relevant media reports, the Federal Reserve, as the central bank of the United States, decided to suspend the 11th consecutive increase in the base interest rate at the regular monetary policy meeting.
This shows that the United States has stopped raising interest rates and is ready to maintain the status quo, and monetary policy has returned to stability.
2. The Bank of England's continued interest rate hikes
On the Bank of England's side, the pace of interest rate hikes has not stopped.
In the longer term, as other central banks are nearing the end of their respective monetary policy cycles, the market expects the Bank of England to have a long way to go in raising interest rates, with the UK peak rate expected to reach 5.5% or even 6%, compared to the current benchmark rate of 4.5%.
Bank of England Governor Andrew Bailey said on Tuesday that inflation in the UK will eventually come down, but it will take a little longer than expected.
With borrowing costs rising across the board, many of the UK's big lenders have reversed mortgage deals or raised lending rates in recent days.
And in the face of this unregulated inflation rate and interest rates that have been rising, UK Finance Minister Jeremy Hunt also said in the face of these problems: "I really understand the pain of many families, but the biggest thing that can be done to reduce the pressure on households is to support the Bank of England because they are suppressing inflation." “
Tips：
The pricing logic of the exchange rate market lies in transaction expectations, which are strongly correlated with interest rate expectations and monetary policy, as well as various other factors. Therefore, it is not possible to judge the rise or fall of the exchange rate just by focusing on the matter of interest rate hikes.
So why does the pricing logic depend on transaction expectations?
This is because when the number of interest rate hikes has already been predicted by the market, the impact of this event has already been reflected in advance, and it cannot wait until after the rate hike has occurred.
In a nutshell: no one is indifferent in anticipation of the future, and the market is no different.
3. The UK economy is improving
According to British media Reuters, the salary increase in the first three months of this year in the UK rose to 7.6%, a higher-than-expected wage increase. Employment also soared during this period, with employment increasing by 250,000, while a Reuters poll suggests that the momentum will continue in the future, with an increase of 162,000.