The pound has fallen further after suffering a severe blow last week, and is now at a level against the dollar that the British last saw when Margaret Thatcher was prime minister, some 37 years ago.
In early trading in Asia, the pound dropped more than 4 percent to $ 1.03 this morning, before picking up again and now fluctuating around $ 1.05. Investors will see with Argus eyes how the stock exchanges in Europe and the UK themselves will open, before the US financial markets also open. That could mean a further decline in the pound.
The weakening of the pound came after the new Finance minister, Kwasi Kwarteng promised historic tax cuts last Friday, which he wants to pay with huge loans. The former finance minister Lord Ken Clarke criticized the tax cuts yesterday. He expects the pound to implode. In an interview on the BBC, he said: “I am afraid that these are the types of measures that are usually tried unsuccessfully in Latin American countries”.
In addition to the announced tax cuts, the pound has already been hit by the recent interest rate hikes by central banks worldwide, the unprecedented inflation in the UK – the largest of all G7 countries-is playing a role, driven by a huge energy crisis, and the steep rise in the US dollar, which after a long time is again seen as a flight Hill on the currency highway, is leading to further pressure on the British pound.
