The British pound crashed to a record low against the US dollar on Monday. It plunged 5% to just above $1.03 during trading in Asia and Australia, falling 3.6% more from Friday. This has raised predictions that the pound could eventually plunge to parity with the US dollar.
The euro also hit a fresh 20-year low amid recession and energy security fears. The pound’s value against the euro has fallen in recent weeks and £1 now buys €1.10.
“Should there be any escalation to the war in Ukraine … we would see further sharp downside in the Pound as well as the Euro,” said Clifford Bennett, chief economist at ACY Securities, an Australian brokerage firm.
However, Chancellor Kwasi Kwarteng has urged markets and traders to “keep calm” and carry on. On Friday, Kwarteng announced that the United Kingdom would implement the biggest tax cuts in 50 years, at the same time as boosting government borrowing and spending.
The previous record low for the British pound against the US dollar was 37 years ago on February 25, 1985, when 1 pound was worth a little over $1.05.
According to reports, the Bank of England is preparing an intervention- a statement is expected as soon as today.