LONDON, March 15 (Reuters) – The British pound fell towards the greenback however surged towards a tumbling euro on Wednesday as markets fretted in regards to the state of the European banking system because the fallout from the collapse of U.S. tech lender Silicon Valley Financial institution gathered tempo.
Shares in Swiss lender Credit score Suisse plummeted greater than 30% at one stage after its largest investor mentioned it couldn’t present extra monetary help to the financial institution.
The slide led the broader European banking index (.SX7P) decrease, triggering demand for the safe-haven greenback and away from high-beta currencies such because the pound.
However worries of one other European banking disaster had been additionally weighing on the one foreign money.
The euro was 1% decrease towards the pound at 87.42 pence, after earlier dropping to 87.19 pence, its lowest stage since Dec. 20, 2022.
“The main target has shifted from a U.S. banking story to the Credit score Suisse story and markets are assessing the ramifications of doable contagion,” mentioned Francesco Pesole, FX strategist at ING.
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“Markets are seeing the euro zone markets possible hit first and British markets to be barely extra shielded, so it is sensible that the euro is performing worse than the pound at this stage.”
The pound was final down 0.7% towards a broadly stronger greenback at $1.2070, having hit a one-month excessive of $1.2203 on Tuesday.
The greenback index , which measures the foreign money towards a basket of six others together with the pound, was up 1.1% at 104.86.
Merchants now see the Financial institution of England pausing price hikes because the almost certainly consequence at its March coverage assembly. Buyers see round a 40% likelihood of a 25 foundation level hike and round a 60% likelihood they maintain charges unchanged.
Final week, the possibility of a BoE price pause stood at round 10%.
Focus was additionally on Westminster the place British finance minister Jeremy Hunt introduced a fiscal plan that he hopes will pace up Britain’s stagnating economic system, whereas upgraded financial forecasts confirmed the economic system would now keep away from a recession this yr.
“Different occasions have stolen the headlines however this was by no means possible going to be a headline reaching price range anyway,” mentioned Jane Foley, head of FX technique at Rabobank.
Reporting by Samuel Indyk
Modifying by Mark Potter, Kirsten Donovan
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