Pound falls to record low against the Dollar
Last week, Chancellor Kwasi Kwarteng announced the largest UK tax cuts in over 50 years sending the Pound into a downward spiral. This combined with significant increase in government borrowing, has seen markets lose confidence in the UK’s economic outlook.
Over the weekend and throughout last night, the British Pound suffered further declines, concluding in record lows against the Dollar. Markets are selling the Pound as concerns grow the UK government will be unable to finance its debt burden.
Should GBP/USD levels remain at this point, commodities such as oil and gas, will be more expensive, as well as household items imported from overseas. There is also increased expectation that the Bank of England will need to raise interest rates further to combat the rise in inflation that these new measures may cause. This would certainly be felt by homeowners across the UK as mortgage payments would rise for millions of people.
The strength of the Dollar is also contributing to the record lows for the Pound, however looking ahead this week the ‘Greenback’ could face some headwinds. The latest US durable goods orders release is expected to report a sharp drop in order growth last month, potentially nulifying some of the Dollar’s strength.
This morning, Cable (GBP/USD), has picked back up to trade near the midpoint of 1.07 -1.08 corridor.
Any upside in the Pound may remain limited this week as the UK’s latest GDP figures are expected to confirm domestic growth contracted in the second quarter.