The pound has fallen to a fresh 37 year low against the dollar as financial markets reacted to the biggest tax cutting moves in 50 years.
UK stocks also dropped after chancellor Kwasi Kwarteng outlined a series of tax cuts and economic measures in a massive shake-up of the country's finances.
The pound fell more than 3% against the dollar, dropping below $1.09. Sterling has fallen recently over worries about the economy and partly due to a stronger US dollar.
The pound also fell more than 1% against the euro on Friday, dropping to โฌ1.12. Mr Kwarteng refused to comment on the dropping value of the currency, saying he "doesn't comment on market movements".
The cost of government borrowing soared following the announcement, rising by near-record amounts, as investors did the sums over the new strategy.
According to Bloomberg data, analysts expect UK interest rates to hit 5.2% in August 2023, with expectations rising that there could be a one percentage point interest rate hike at the Bank of England's next meeting in November.
The IFS) said the market reaction was "worrying" as the government's new strategy relied on investors being willing to lend more to the UK.
"The plan seems to be to borrow large sums at increasingly expensive rates, put government debt on an unsustainable rising path, and hope that we get better growth," said IFS director Paul Johnson.
But that table, while an aspiration that every chancellor and every politician seeks, has not convinced the markets. It is an assumption of extra tax revenue that has replaced actual tax.
The prime minister criticised bean counters in her leadership campaign. Today's plan only shows one side of the ledger. For a chancellor making a debut, it is usual to focus on fiscal credibility. That was not the priority here.
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What do you think about the British pound crashing?
The UK is doomed. With things lining up for a perfect storm I fail to see any good path forward for the UK right now.. But that is assuming the government is competent and taking the right steps. Now I doubt it would surprise people that I dont think the government is competent and taking the right steps.
So what exactly am I talking about? Well first of all we need to talk about Brexit. Its a thing. It will severely undermine the UK market in the medium to long term and I have seen literally no attempts to solve this issue, with the only solution that I can see is to rejoin the EU either as a full member (which is unlikely) or as a partner nation like Norway. The UK simply can't maintain economic growth, especially in services, without ready access to the continent they are part of.
So Brexit is a shot to the leg. Whats next? Well the Ukraine war is probably the UKs greatest threat right now, or more specifically the Russian energy sanction on Europe. While I dont think the UK gets much if any gas from Russia specifically that is pretty much irrelevant at this point because the EU is going to more or less suck up every drop of gas, oil and coal they can this winter and at any price which will push the cost up for the UK as well.
The difference between the UK and the EU is that the EU will prioritize themselves as well as the fact that they already filled their own storage above 80% which should last them most of the winter. The UK however has not filled their storage and will be at the complete mercy of the insane energy prices this winter, if they can even get any. This is so bad that there is a good chance that people will die in the UK this winter.
But that brings us to the third and final major reason I think the UK is screwed. Liz Truss. She is an idiot and her policies appears to be more or less expertly designed to ruining her own country. I predict that her reign as prime minister will be very short indeed. So yeah, I see no future in the UK economy and as a result the pound is going to take a nose dive.
Nearly every single critic of Brexit predicted this - or at least the ones that didn't assume it was just a Russian disinformation effort to weaken NATO. There is a sort of stereotype Americans have of British people, that they are smarter and thus harder to trick. This will take some adjustment.
A stupid publicity stunt by a woman with no real ideas that's backfired. The tax cuts only really benefit the super wealthy and the average person won't really see a difference as rising costs eat up the pennies they'll get back. Biden was right to publicly criticise her.
Given whats happening to Europe as a whole due to very poor energy choices as well as their choice to wage war on Russia a country they are depended upon for what energy they do have. Its going to be very difficult for Europe regardless.
If Joe Biden had not crippled U. S. production, and distribution chain with new regulations as the first thing he did upon taking office we might be able to help them more. As it stands even if we had the energy we could not get it to them in the supplies required.
Cheaper GBP means UK export will very likely increase. It's good for economy if British National Bank doesn't print too much of its currency. Of course it's bad for savers in GBP, because they will lose real value of their savings.
5% British 🏴 interest rate is good. Jump on it. 12% in USA by midterms 4 years from now. We are in recession now but they will not call it that. Hyperinflation coming deflation stagflation. Going to hit them all over the next 8 years in USA 🇺🇸
The Euro is also crashing against the dollar because Europe has put itself into a very difficult position for the fall with both being depended upon Russia and waging war against it.
It's bad news for the UK's main trading partners, since their goods will be more expensive to import. It's good for UK exports, though, since UK goods will be cheaper in the other counties.
To me, I donโt really care because Iโm an American! Let the British worry about their problems and let us worry about our problems. Our biggest problem is our president, Vice President and our Speaker of the House.
Not surprised that the £ has fallen against other currencies, I've been expecting it, but this years GDP has not fallen in comparison to to other countries.
Were there comparable spending cuts to go with the tax cuts? If not, then the natural initial result will be more borrowing, so of course rates will rise.
Principal British exports include machinery, automobiles and other transport equipment, electrical and electronic equipment (including computers), chemicals, and oil. Services, particularly financial services, are another major export and contribute positively to Britain's trade balance.
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