September 27, 2022
Following last week’s declaration by the incoming U.K. administration that it will enact tax cuts and investment incentives to encourage growth, the British pound sank to a record low on Monday morning in Asia.
In Asia, sterling momentarily dropped 4% to an all-time low of $1.0382, continuing the recent months’ slow trading as the U.S. dollar gains momentum. Monday morning at 11 a.m. London time, it had recovered to $1.0694.
Critics claim that those economic policies will unfairly benefit the wealthy and could cause the U.K. to incur significant debt at a time when interest rates are on the rise.
The path of least resistance at this time, according to Mazen Issa, senior forex strategist at TD Securities, is going to be lower. Before the pound hit a new low, he told CNBC, “It doesn’t seem like the U.K. government is throwing the market a bone here in terms of having a much more tempered fiscal trajectory.
According to Nicholas Ferres, chief investment officer at Vantage Point Asset Management, fighting inflation while the government seeks to stimulate the economy is a “huge problem” for the Bank of England.
The Bank of England may even do an emergency policy meeting this week and hike rates, that wouldn’t surprise me if that happened,” he said.
Source: CNBC
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