The pound just fell to its weakest level since 1985 against the US dollar
The pound slid to its weakest level in nearly four decades, weighed down by dire economic prospects and the latest surge of US dollar strength.
The pound fell 1% to $1.1410, a level last seen in 1985 when Margaret Thatcher was prime minister. Just as then, the economic outlook is difficult. Britain is grappling with the twin threats of double-digit inflation and the prospect of a long economic contraction. The Bank of England warns of more than a year of recession.
The last time the sterling dollar exchange rate was this low, the world’s wealthiest countries signed the Plaza Accord, an agreement to weaken the US currency. The greenback is surging against one of its major peers again, deepening the pound’s slide and putting pressure on the central bank to keep pace with interest rate hikes in the USA.
The expected impact of economic growth, combined with a widening trade deficit, is weighing on the pound, which has weakened more than 15% this year, posting its biggest drop since 2016 last month. The currency is also coming under pressure from concerns over Prime Minister Liz Truss’ economic program. Plans to revise the BOE’s mandate amid its toughest inflation challenge since independence are sparking further unease.
Yet the pound remains stronger against the euro than it was during most of the Brexit negotiations as well as during the global financial crisis.
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