British pound hits 37-year low as recession fears grow
Concerns and fears are growing in the UK regarding the economic outlook with central banks upping interest rates to fight the ongoing inflation.
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Officials note they will not back out until inflation is tamed, even at the expense of the economy. (Photo: Tolga Akmen/Getty images)
The sterling pound plunged on Friday to a new 37-year low against the dollar as traders grow increasingly concerned regarding the economic outlook with central banks upping interest rates to fight the ongoing inflation.
The British currency fell as low as $1.1151, the lowest since 1985, after the Bank of England (BoE) hiked Thursday borrowing costs by 50 basis points.
Central banks around the globe are in the process of hiking borrowing costs, but the Fed has adopted a specifically hawkish position, with officials noting they will not back out until inflation is tamed, even if it's at the expense of the economy.
Traders are now looking to London as UK Chancellor of the Exchequer Kwasi Kwarteng is expected to declare on Friday the "emergency tax-cutting mini-budget," to help businesses and individuals cope with the acute cost of living
This comes as the BoE warns that Britain is slipping into recession, with the cost of food and motor fuel rising at unprecedented levels.
Read: UK likely heading towards a year-long recession
This comes after UK Prime Minister Liz Truss arrived a couple of days ago in the United States to find with US President Joe Biden common ground in pursuing a tough stance against Russia, as well as a hawkish stance toward China.
Truss' visit aimed to reiterate UK's long-term commitment to the war in Ukraine and to vow to send at least £2.3 billion ($2.6 billion) in military supplies in 2023.
Following her trip, Truss was to finalize her mini-budget, as global inflation is soaring, with the UK's accelerating at the fastest pace in 40 years in July, reaching double-digits and adding more pressure on the Bank of England.
Last month, the consumer price index boosted up 10.1% on an annual basis, surpassing the FXStreet-cited market consensus of 9.8% and speeding up from 9.4% in June.
The last time inflation was this extreme was in 1982 - 40 years ago.
Furthermore, research by the International Monetary Fund showed that the increasing energy crisis is wreaking havoc on British family budgets more than any other country in Western Europe.
