British Pound Hits Lowest Level Against Dollar in Decades

Not a great first day for Liz Truss
By Rob Quinn,  Newser Staff
Posted Sep 7, 2022 7:30 PM CDT
As Truss Takes Charge, Pound Hits Lowest Level Against Dollar Since 1985
British Prime Minister Liz Truss holds her first cabinet meeting inside 10 Downing Street in London, Wednesday, Sept. 7, 2022.   (AP Photo/Frank Augstein, Pool)

It's good news for American tourists, but discouraging news for British Prime Minister Liz Truss on her first full day in office. The British pound fell to $1.145 Wednesday, its lowest level in 37 years, the BBC reports. As in 1985, when Margaret Thatcher—Truss' role model—was running the country, the pound's falling value is mainly due to the strength of the dollar. But there are also serious concerns about the state of the economy in the UK, where inflation is at a 40-year-high, reports Bloomberg.

"The markets are seemingly relishing the opportunity to bash the British pound," Valentin Marinov, head of G-10 currency research at Credit Agricole in London, tells Bloomberg. The country's central bank, the Bank of England, has warned that Britain is likely to fall into recession this year, which would "overwhelmingly be caused by the actions of Russia and the impact on energy prices." An updated cap on energy prices is due next month. Households' average annual bills for electricity and natural gas had been due to rise from $2,275 to $4,095, but Truss plans to cap the increase so the typical household will pay only $2,285.

Analysts say Truss' plan might make the recession shorter and less severe—but the government will have to borrow around $110 billion to pay for it, and Truss has pledged to cut taxes by around $35 billion. Charities warn that even the lower price cap under the prime minister's plan will leave millions more people struggling to heat their homes this winter. CNBC reports that the pound is down more than 15% against the dollar so far this year, but it will have to drop a lot more to sink below the all-time low of $1.052 it hit in February 1985. (More British pound stories.)

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