The British pound sterling has hit an all-time low, but what does this actually mean? And how has this happened? Open Access Government reveals all
The pound has fallen dramatically as a result of Liz Truss’ sweeping tax cuts.
In fact, since the pound sterling first went into free float in 1971, no event has sent Britain’s currency lower than the mini-budget announcement by the new chancellor of the exchequer Kwasi Kwarteng on Friday.
Why has the British pound sterling dropped?
The pound dropped as an immediate result of the new Conservative government’s spending and tax plan.
The steep tax cuts blatantly benefit the wealthiest individuals in the UK.
Further measures have been introduced to help mitigate the sharp rise in energy prices.
British pound sterling conversion rates
- 1 British pound sterling now equals 1.12 Euro
- 1 pound sterling equals 1.10 United States Dollar
- 1 pound sterling equals 1.69 Australian Dollar
- 1 pound sterling equals 1.50 Canadian Dollar
- 1 pound sterling equals 158.80 Japanese Yen
- 1 pound sterling equals 8.63 Hong Kong Dollar
- 1 pound sterling equals 64.33 Russian Ruble
What does a weaker pound mean for the UK?
A slump in the British pound sterling will have profound impacts on the UK economy.
A slump in the British pound sterling will have profound impacts on the UK economy
It means prices will be more expensive for UK consumers buying foreign goods. It also means that travelling to the US, or in any country that uses the US dollar, will become considerably more expensive.
The UK imports 50% of its food – not to mention oil. The cost of everything, from bananas to petrol, will rocket.
The Bank of England had to intervene
In an extremely rare move, the Bank of England intervened.
The Bank is going to lend funds to the government to bring down the interest rates on government debt.
It plans initially to spend £65bn – £5bn a day – buying UK bonds until mid-October.
Should we be worried?
Most would agree that the pound dropping to its lowest ever levels is of great concern.
Only time will tell just how damaging the crisis will be, and whichever government inherits the economic mess will have to work hard to mitigate the immense problems that it will cause.
The British pound just hit its lowest level ever against the dollar, $1.04. Before the financial crisis it was as high as $2. Before Brexit it hovered between $1.45 and $1.70. $1.04 is extraordinary—and a significant factor was clearly @trussliz announcing tax cuts for the rich.
— Brian Klaas (@brianklaas) September 26, 2022
Buckle up for the week ahead on financial markets — the British Pound is absolutely crashing tonight, mostly because Boris Johnson was even worse than Biden… pic.twitter.com/LQN3ROEaEw
— Steve Cortes (@CortesSteve) September 26, 2022
The #British #pound just hit an all-time low against the U.S. #dollar, trading below 1.05 for the first time ever. It looks like the latest round of deficit-financed tax cuts will backfire, as a weak pound causes the cost of living to rise by more than the value of the tax cuts.
— Peter Schiff (@PeterSchiff) September 26, 2022
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