The Pound has Dropped to a Two-Year Low Against the Dollar
The pound has dropped to two-year lows against the dollar, as global recession fears grow and energy prices continue to rise. Sterling, which was trading below $1.19 at one point, is also weak, according to analysts, because markets are concerned about future UK economic growth.
They added that sterling could fall even further due to predictions of UK economic stagnation and rising inflation. Following Tuesday's losses, London stocks recovered some ground. The resignation of two senior government ministers, including former Chancellor Rishi Sunak, on Tuesday evening was not a significant factor in the pound's fall, according to Rabobank head currency strategist Jane Foley on BBC Radio 4 Today.
"The market is so much more concerned with growth, and what is this government going to do... the news in itself didn't create too many additional woes," she said.
The pound fell below $1.19 on Tuesday for the first time since March 2020, when the first UK Covid lockdown was implemented. It was trading at $1.189 in late London trading on Wednesday afternoon, down from a two-year low of $1.187. It later climbed above $1.19.
However, sterling rose against a weaker euro, rising 0.5 percent to 85.46 pence, as investors worried about the economic consequences of rising energy prices. A weak pound makes imports such as food more expensive, and it raises the price of gasoline at the pump. It also means that UK tourists get less value for their money when shopping abroad.