Britain ‘in danger of being laughing stock’ as pound hits record low against dollar
STERLING plunged to a record low against the US dollar early on Monday after higher interest rates knocked international confidence in the currency.
At the same time, sterling fell to €1.11, which makes a euro worth 90p, its strongest since January last year.
The pound fell by more than 4% to just $1.032 dollars in early Asian trading, having already tumbled on Friday in the aftermath of UK Chancellor Kwasi Kwarteng’s mini-budget.
It adds to a months-long fall in the value of the pound.
The euro has been sliding against the dollar too, although not as quickly or as sharply.
Personal finance expert John Lowe of Moneydoctors.ie, said the fall in sterling’s value creates problems for anyone with business or property in the UK – when transferring money back to Ireland they receive less when it is converted into euro.
He said: ‘The UK, I think, is in trouble. Their lending rate has gone through the roof. They left
‘No voice whatsoever’
the EU, they’ve now gone off the top table, they’re not even on the middle table now. They’ve no voice whatsoever anywhere and they are now becoming a bit of a laughing stock.’
The value of the pound has fallen as international currency traders have been selling off sterling in favour of the traditionally more robust US dollar.
Typically traders often buy into the dollar, due to its strength, during times of economic strife, which is why other currencies such as the euro and Japanese yen are also at their lowest against the dollar in decades.
Nevertheless, this week’s particular slump in the value of the pound has also been heavily impacted by political and economic decisions.
Jane Foley of Dutch banking company, Rabobank, said traders have cast some doubt over the spending plans.
She said: ‘They’re worried that some of these tax cuts that have been announced aren’t going to be fully funded. That will result in a large amount of debt at a time when the Bank of England is going to be selling some of its holdings of UK government debt.’
It causes problems for Irish exporters to Britain, one of our largest trading partners.
As the pound has fallen faster than the euro it makes Irish products that are exported to the UK more expensive for British consumers.
Economists, such as former Bank of England Monetary Policy Committee member, Adam Posen, have warned that further Bank of England intervention might now be needed, which has placed further pressure on the pound. Energy bills are one of the things that are likely to increase for Britons as the pound falls – the price of all of the gas that the UK uses is based on the dollar – even if the gas is produced in the UK.
Similarly, the fact that oil prices are based on the dollar means that petrol could be more expensive for UK drivers, as it costs more to be imported by fuel companies.
As the euro has dropped against the dollar, petrol prices could rise in Ireland too but not by as much as in the UK.