On Monday, the Great Britain Pound (British pound sterling) traded as low as $1.1444. This level was a mere fraction above the rate it traded in 2020, as the coronavirus spread, during the pandemic. The pound has fallen by eight percent in the past three months. These regular weak levels have not been seen in decades; since the nineteen eighties.
Several reasons can be cited for the fall of the GBP including political ones. One reason might be the inner turmoil in the ruling Conservative Party as the greatest fall was a day before Boris Johnson stepped down as Prime Minister after a scandalous few months and Liz Truss stepped in, on Tuesday, as the new Prime Minister of Great Britain. She is the fourth Prime Minister from the Conservative Party in a period of just over six years.
Inflation in Britain hovers at above 10 percent, which is higher than its peers, in the EU and in America. Refinitiv data stated that the 10-year UK government bond yield saw a 0.08 percentage rise, on Monday. It has now reached 3 percent, which was last seen, in 2014. Trading in the futures market has seen bets on the pound falling further, against the dollar.
There are also indications that fiscal spending by governments in the European Union will be less that that of U.K., as Truss’ government might cut taxes or put in measures to limit energy bills of households that are at unprecedented levels. The Bank of England (BoE) might have to step in to stabilize inflation. The role of BoE, in future, will depend on the action taken by the government.
Unions across Britain are already planning strikes as the nation’s middle and lower classes are seeing all bills rise to what they consider as unmanageable levels and the people are expecting the government to step in. If the government becomes generous the Bank of England, will have to become strict. If the government is disinclined to address the woes of its citizens, strikes might increase. Great Britain is facing a catch 22 situation, as is the rest of the world, but has seen higher inflation due to certain of its current policies as well as some from the past.
Economies worldwide have taken a beating due to the pandemic as COVID-19 affected all parts of the world. Just as the economy was recovering, the war between Ukraine and Russia exacerbated the economy, worldwide and inflation began to jump in all countries over the world.
China’s hard lockdown also became a factor as it disrupted supply chain issues. Sanctions put on Russia made oil prices soar and although gas prices have fallen in the U.S., Europe is struggling with high prices as Russia says sanctions have affected the working of Nord Stream, the pipeline that carries gas from Russia to Europe.
In the nation, the Biden administration has taken several corrective measures to tackle inflation. The Fed Chair Jerome Powell has taken practical decisions to increase interest rates, without triggering a recession and the dollar has remained strong when compared with several other world currencies.
Federal Regulators Ask Tesla to Recall Certain Car Models Which Would Amount to A 158,000 Recall
