Sterling is about to have its worst month against the dollar since late 2016 and its worst month against the euro since the middle of 2021.

This is because investors are selling the currency out of fear that the British economy will slow down sharply just as inflation is picking up speed. 

As of 9:30 GMT on August 31, the pound had lost 4.4% and was worth $1.1645, which was more than the 4.3% loss it had in April.

On Monday, the value of the pound fell to its lowest level since March 2020, when the spread of COVID-19 caused market panic.

Even though it rose a little on Tuesday to 85.82 pence, the British pound has lost 2.2% of its value against the euro,

putting it on track for its weakest month since April 2021. Shaun Osborne, the chief FX strategist at Scotiabank, said that money markets now indicate that

the Bank of England will raise interest rates to 4.25 percent next year, up from the current 1.75 percent.

"This would make the Bank of England's policy rate one of the highest among major economies," he said, "but it may not be enough to compensate investors

for inflation that is expected to be well into double digits early next year as the economy enters recession."

Concerns about natural gas shortages and rising prices have hurt the value of the pound against the euro.

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