If the pound is worth less, the cost of importing goods from overseas goes up. All that changes when the currency falls. They expect to pay a specific sum for imports and get a certain price for goods and services they sell abroad. Currency traders have given their verdict over the weekend and Monday, sending the pound from almost $1.20 to a record low of $1.03 before a partial recovery to $1.06.Ī sudden and sharp drop in sterling creates uncertainty, throwing the plans of UK businesses that import and export goods into disarray. Her chief finance minister, or chancellor, Kwasi Kwarteng, has been accused of ignoring a 9.9% inflation rate that economists said was only going to worsen, instead choosing in Friday morning’s mini-budget to pump lots more money into the economy. She signalled an expansive economic policy based on wide-ranging tax cuts. The British pound has slumped in recent weeks as markets have become disenchanted with the new administration under the newly appointed prime minister, Liz Truss. For instance, Turkey’s currency is worth about 40% less against the US dollar than last year after traders were spooked by a rise in annual inflation to more than 70%. When foreign exchange markets turn against a country, the value of that country’s currency begins to plummet.
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