Pound falls to lowest level against US dollar since 1985

[najaB]

Didn't know if to put this in the existing thread about the new government or not - but the less than rosy outlook for the UK economy is getting even less rosy:

The pound slid to its lowest level against the US dollar since 1985, an ominous development on Liz Truss’s first full day as prime minister.

The low-point not seen since the days of Margaret Thatcher resulted partly from a strong dollar, as Andrew Bailey, governor of the Bank of England, noted this morning.

But Britain’s dim economic outlook played a big role. The bank has warned that skyrocketing energy prices will soon cause a recession lasting till the end of 2023, a year in which Britain was already forecast to have the weakest growth in the G7.

Pound falls to lowest level against US dollar since 1985

Warnings of recession rock sterling as investors spooked by Liz Truss’s energy bills plan

www.independent.co.uk

Not a good thing for anybody who has to buy things priced in USD - like natural gas. The pound is down around 18% on this time last year.

 

[Perthsaint]

Another joyous benefit of brexit.

 

[JamesT]

Not a good thing for anybody who has to buy things priced in USD - like natural gas. The pound is down around 18% on this time last year.

Another joyous benefit of brexit.

As a comparison, the Euro is down 16.3% compared to a year ago. The Yen is down 21.5%. Everyone is struggling against the Dollar.

 

[Perthsaint]

As a comparison, the Euro is down 16.3% compared to a year ago. The Yen is down 21.5%. Everyone is struggling against the Dollar.

Yet only brexitland is daft enough to add brexit to its problems.

 

[najaB]

As a comparison, the Euro is down 16.3% compared to a year ago. The Yen is down 21.5%. Everyone is struggling against the Dollar.

Yet only brexitland is daft enough to add brexit to its problems.

Indeed. If you compare where the currencies were pre-Brexit (June 2016) to now, Sterling is down nearly 23% while the Euro is down 12%.

 

[Trackman]

Not a good thing for anybody who has to buy things priced in USD - like natural gas. The pound is down around 18% on this time last year.

On the bright side, it may lure US tourists in to spend their money over here.

 

[najaB]

On the bright side, it may lure US tourists in to spend their money over here.

That is true, it makes our products cheaper to buy as well. If only we didn't have so many problems buying inputs or our ports weren't in such a mess.

 

[philosopher]

When the dollar was this strong in 1985, the United States, France, West Germany, Japan and United Kingdom agreed to deliberately depreciate the US dollar at the Plaza accord in New York:

Plaza Accord - Wikipedia

en.wikipedia.org

The Plaza Accord was a joint–agreement signed on September 22, 1985, at the Plaza Hotel in New York City, between France, West Germany, Japan, the United Kingdom, and the United States, to depreciate the U.S. dollar in relation to the French franc, the German Deutsche Mark, the Japanese yen and the British Pound sterling by intervening in currency markets. The U.S. dollar depreciated significantly from the time of the agreement until it was replaced by the Louvre Accord in 1987.[1][2][3] Some commentators believe the Plaza Accord contributed to the Japanese asset price bubble of the late 1980s.

It would be interesting to see if something similar happens this time as it sounds like a weaker dollar could be a win win. A weaker US dollar would benefit the US by being to sell goods abroad more cheaply while it should help other countries buy stuff priced in dollars such as oil more cheaply, helping to tackle inflation.

 

[Perthsaint]

That is true, it makes our products cheaper to buy as well. If only we didn't have so many problems buying inputs or our ports weren't in such a mess.

It makes our products cheaper to buy temporarily. The resulting inflation increases wages and other costs to wipe out the gain caused by devaluation.

 

[najaB]

It makes our products cheaper to buy temporarily. The resulting inflation increases wages and other costs to wipe out the gain caused by devaluation.

I'm not sure I understand how high inflation in the UK makes our goods less cheap for Americans to buy if their dollars are worth significantly more than our pounds.