Britain’s pound sterling tumbled to its lowest level against the US dollar since 1985 on Wednesday, extending the decline as investors dumped British assets amid a bleak economic outlook and a rising dollar.
The pound has been hit hard by rising inflation, a looming recession and fears that tax cuts and increased public spending under the new government could exacerbate price pressures.
The currency, which has fallen by more than 15% against the dollar so far this year, is also a headache for England’s central bank as it raises the cost of imports and could cause more imported inflation.
The currency even retreated to $1.1407, the lowest since 1985, according to Refinitiv data. Later, the pound was down 0.4% at $1.1475, regaining some ground.
“For now, the momentum is very negative. I hope the moves have been so violent that the Bank of England doesn’t like it and can be more hawkish (aggressive against rising prices),” said Jan von Gerich, chief analyst at Nordea.
“There may be a pound sterling rally, but I wouldn’t buy it right now,” he added.
The pound sterling hit an all-time low of $1.0545 in March 1985, just before the G7 powers acted to contain the Reagan-era superdollar in the so-called “Plaza Accord”.
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