Western Morning News (Saturday)
Pound at lowest in nearly 40 years
THE pound has hit a new 37year low against the dollar as new official retail figures painted a bleak picture of the UK’s economy.
Sterling dropped below 1.14 dollars for a couple of hours on Wednesday morning, pushing it below recent lows and taking it to its worst point since 1985.
The drop came after newly released retail figures showed a drop of 1.6% in August, compared to the 0.5% fall economists predicted.
“This morning’s retail sales in the UK continued to show a deteriorating consumption picture in the UK, which emerged more from the continuation of a steady downtrend from last summer rather than the single grim data point in a rather volatile series,” said Francesco Pesole, a currency expert at ING.
“This has been the last important piece of data before the Bank of England meeting on Thursday and has hit the pound this morning.”
The pound regained some ground in the early afternoon but was still trading down around 0.5% against the dollar, buying a little over 1.14 dollars. It lost 0.3% against the euro, also trading at a little over 1.14 euros.
The drop came on the 30th anniversary of Black Wednesday, when the UK had to withdraw from the European Exchange Rate Mechanism (ERM). The ERM was designed to ensure that the exchange rates between European currencies remained stable.
Governments and central banks had to ensure that their currency did not fluctuate by more than 6% from their European neighbours. The UK failed.
The value of the pound was dropping quickly and the John Major government spent billions trying to prop it up. But it could not keep up with currency traders desperate to sell pounds. Eventually, the government had to pull out of the ERM, something which damaged the Conservative Party’s reputation on handling the economy for years.
Sterling has been weak against the dollar for months, largely because of the strength of the US currency. The euro has also been at multi-decade lows against the dollar.
Meanwhile, almost half of UK adults who pay energy bills have said they are struggling to afford them, according to new figures.
The Office for National Statistics revealed that 48% of adults said they were finding it “very or somewhat difficult” to afford their energy costs in a survey between August 31 and September 11. It represents an increase on a fortnight earlier when 45% said they were struggling with energy bills.
However, households have been promised support by Liz Truss’s new Government due to the soaring cost of energy since the start of the survey period.
The new Government said it will cap energy bills at £2,500 from October, including a £400 rebate which will be paid in six instalments. It came after industry regulator Ofgem had originally said average bills were due to rise by 80% to £3,549. Households had already seen their energy costs surge by 54% after the price cap for an average home increased to £1,971 in April.