The British pound is dropping like a rock. Covid, war in Ukraine and brexit are all things affecting the British Pound.
The British pound hit a new low against the dollar on Monday — the financial equivalent of a no-confidence vote in new Prime Minister Liz Truss.
The big picture: Britain’s unexpected 2016 Brexit vote to leave the European Union served as starting gun for the current era of compounding global uncertainty.
The referendum ripped apart long-established systems that guided the country’s trade, economic policy and political relationships.
Driving the news: The pound sterling — the foundation of London’s status as a global financial center — briefly plunged to a new low of 1.04 against the dollar.
The pound is down more than 20% against the dollar just this year.
State of play: Capital rushed out of British markets after the government presented its so-called mini-budget on Friday. Prices for government bonds — known as “gilts” — tumbled along with the currency.
Truss’ plans leaned heavily on tax cuts — which would mean the government would have to borrow more — but didn’t seem to include much detail about how such borrowing would boost Britain’s long-term economic prospects.
Truss’ Conservative government— like many governments across Europe — faces the task of trying to manage surging inflation and an energy crisis.
Yes, but: Just because Britain has gotten a rough ride in the markets in recent days, doesn’t mean all government plans for dealing with difficult economic conditions will be treated similarly.
Truss has repeatedly criticized prevailing economic orthodoxy, and recently removed one of the top civil servants at the U.K. Treasury, further unnerving investors.
What we’re watching: Whether other governments will get the Truss treatment from financial markets if they announce efforts to run larger deficits.Sep 27, 2022 – Economy & Business British pound gets pounded as tax cut plan sinks in Matt Phillips, author of Axios Markets