The British pound has hit its lowest level against the US dollar in nearly four decades.
Just after 2pm on Wednesday, the pound fell to $1.1407, according to Refinitiv data – its lowest level since 1985.
The pound has lost more than 15% against the dollar so far this year, hit by dollar strength and the UK’s dismal economic outlook.
UK inflation has been the highest among the G7 economies, and a recession has been forecast by analysts for months.
But now Liz Truss has replaced Boris Johnson as prime minister, vowing to help people deal with rapidly rising energy bills but at the same time make it clear that she wants to cut taxes.
She also has exclude wind tax extension for oil and gas companiesleft no choice but to increase government borrowing to finance her promise.
The pound’s dire performance will also make the Bank of England more likely to raise interest rates when its monetary policy committee meets next week.
The bank raised interest rates in an attempt to calm inflation – reached 10.1% in JulyLatest figures are available – but a struggling dollar will raise import costs, fueling inflation.
Sterling’s all-time low against the dollar was $1.0545 in March 1985, just before the Plaza Accord, when some of the world’s largest economies took action to rein in the super-dollar. is the Reagan era.
Meanwhile, on Wednesday, the pound also fell nearly 1% against the euro, at 86.83, although over the past year it has performed better against the common currency against the US dollar.
