UK: Pound Falls to Record Low Against US Dollar
The British pound slumped to an all time low against the US dollar on Monday, falling almost 5pc overnight to $1.0327. It later leveled out at $1.05 - around 2.9pc below the previous session's close....
Facts
- The British pound slumped to an all time low against the US dollar on Monday, falling almost 5pc overnight to $1.0327. It later leveled out at $1.05 - around 2.9pc below the previous session's close.1
- The nadir came after Chancellor Kwasi Kwarteng said on Sunday that there were 'more [tax cuts] to come,' following a £45bn tax cut package that was announced by Kwarteng on Friday.2
- The Chancellor's words prompted some to call for aggressive rate hikes and urgent emergency action from the Bank of England. Experts forecast that interest rates could reach as high as 5.5% or beyond by next spring.3
- The new exchange rate risks pushing up the prices of imported goods that are priced in dollars, including gas and oil. Such increases could further raise inflation in the UK, which is already at its highest rate in decades.3
- The slump in the pound comes as the euro also fell to its own 20-year low on Monday, dropping to $0.96. The decline in the eurozone's currency comes amid the looming threat of recession, a continuing energy crisis as the war in Ukraine rages on, and as a far-right party led by Giorgia Meloni won a clear majority in the Italian elections.4
Sources: 1Telegraph, 2Bloomberg, 3BBC News and 4Reuters.
Narratives
- Left narrative, as provided by Independent. Chancellor Kwarteng and Prime Minister Liz Truss are recklessly gambling with the UK's finances. Their plans rely on trickle-down economics, a method which has been tried time and time again and repeatedly proved ineffective. The only thing these incompetent politicians will succeed in is making the rich richer and the poor poorer.
- Right narrative, as provided by Itv. Kwarteng's tax cuts are part of a comprehensive and bold plan to revive the UK's stagnant economy. While it may seem like these programs will favor higher earners, the measures will stimulate the economy at large by incentivizing businesses to invest - something which will strengthen the nation's finances and help those at all income levels in the UK.
