UK inflation, economic weakness and uncertainty about the policies of the new prime minister have made the pound vulnerable, say analysts
London — Sterling skidded against the dollar on Thursday to its lowest level since March 2020 as storm clouds gathered over the British economy and investors seek safety in the US currency.
Currencies globally have been falling sharply against the dollar, with the euro also down heavily on Thursday, but analysts say a combination of inflationary pressures, economic weakness and uncertainty about the policies of the new prime minister — who is due to be announced on Monday — has made the pound particularly vulnerable.
"There’s also a Liz Truss risk premium starting to get priced in. Clearly the market is not responding well to some of the policies Truss has announced, especially the funding of the twin deficit in the UK," London-based Patel added. The pound’s problems have been compounded by a strengthening dollar. The US dollar index which measures the greenback against a basket of currencies, was last up 0.9% at 109.74. It earlier reached a new two-decade high of 109.99.
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