Sterling hits its lowest level since July 1, 2020.
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The pound fell to as low as $1.1029 at 12:20pm London time, hours after the measures were announced in the House of Commons.
The British pound has plummeted against the greenback this year, hitting levels this month not seen since 1985. Friday’s measures were billed by the government as heralding a new era of the UK. UK focus on growth, and that includes tax cuts and investment incentives for businesses.
The Bank of England said on Thursday that the UK economy was likely already in recession as the country raised interest rates by 50 basis points.
Investors abandon UK bonds amid expected increase in government debt. Paul Johnson, director of the Institute for Fiscal Studies, said markets appeared “appalled” by the size of the “fiscal gift”, and said it represented the highest tax cut in half a century. via.
Yields on two-year UK government bonds hit their highest levels since October 2007 and 10-year yields hit their highest levels since 2010. Bond yields are inversely related to prices.
The UK stock market also fell, with the FTSE 100 hitting its lowest level since March.
Jane Foley, senior FX strategist at Dutch bank Rabobank, said the market is skeptical about the government’s 2.5% growth target, even though the measures are “uninformedly designed. shame to drive demand.”
“The obvious implication is that BOE rates are likely to be higher in the longer term than they have been in the past.
case,” she said in a note.
With the UK hitting a record debt-to-GDP ratio, the pound is vulnerable to a downward correction if foreign investors are reluctant to finance the deficit, Foley said; and “the market is clearly very skeptical of this government’s ability to manage debt.”
The euro also fell against the dollar on Friday morning, dropping 0.8% on the day to $0.976 after a release showed the eurozone Purchasing Managers’ Index fell to 48.2 on the month. Ripe. S&P Global said that means the bloc is likely to enter a recession.
The dollar has been boosted this year due to stock market volatility and Federal Reserve interest rates rate of increase.
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