Pound hits record high against dollar, markets fall on recession fears – Business

The pound hit a record low against the dollar on Monday amid mounting concerns about the British economy after the government a statement Huge tax cut budget.

The sell-off came as most stock markets across Asia fell again on growing expectations that a central bank rate hike to combat hyperinflation would lead to a deep and painful recession.

Officials in several countries, including the United States, Britain, Switzerland and Sweden, revealed further increases in the cost of borrowing.

These moves sent stock markets into the red again after officials reiterated their focus on fighting inflation, even if it means causing a recession.

But the biggest losses this week were the pound, which fell below $1.10 for the first time since 1985 when new Finance Minister Kwasi Koarting announced his controversial mini-budget.

Then on Monday it extended losses to an all-time low of $1.0350 in Asian trade after he said he plans to reveal further cuts, despite his budget causing turmoil in London markets.

It also fell to a two-year low against the euro, although the single currency remains under pressure against the dollar, stabilizing at 2002 levels.

Now, observers are warning that the pound may par with the dollar.

Quarting, who was appointed by Liz Truss after she became prime minister earlier this month, said he plans to cut taxes to revive Britain’s economy and save money to help families from rising energy costs.

But investors were appalled by the massive amount of borrowing likely needed for the multibillion-pound package, which critics said would benefit the wealthy far more during the cost-of-living crisis.

Ray Atrell of the National Australian Bank said: “Whether the UK government’s announcement of the largest tax cut since 1972…would in time bring big dividends for growth is not something markets are still willing to consider.”

“Instead, they have been consumed by concerns about the scale of the UK government’s financing needs in the near term, at a time when the current account deficit is more than eight per cent of GDP.” “There has already been talk of downgrading the UK’s sovereign rating,” he added.

The former US Treasury Secretary, Lawrence Summer, was highly critical of Britain’s recent monetary decisions.

He said: “I am very sorry to say that, but I think the UK is acting somewhat like an emerging market turning itself into a sinking market.” Bloomberg TV Wall Street Week last week.

“Between Brexit, how far the Bank of England has fallen behind the curve, and now these fiscal policies, I think Britain will be remembered for having (followed) the worst macroeconomic policies of any major country in a long time.”

Read: Britain’s new economic vision leaves viewers with nightmares

Sterling’s collapse came as markets around the world were plunged into a tailspin due to recession fears stemming from sharp monetary policy tightening by central banks that have battled high inflation for decades.

The decline in London was reversed in Europe and New York, where the Dow Jones index reached its lowest level in two years, and Asia followed suit.

Tokyo slipped 2 per cent as traders returned there from a long weekend, while Sydney, Seoul, Singapore, Taipei and Jakarta prices fell.

But Hong Kong rose as traders welcomed the news that the city had eased strict quarantine measures for travelers, providing a much-needed boost to the beleaguered economy.

Macau casino shares led the way as the city said it would accept Chinese tour groups again from November, after they were banned during the pandemic. Shanghai shares also rose.

Oil prices rose slightly, although they barely retracted the heavy losses incurred on Friday as expectations loomed of a recession looming and the demand outlook dented.

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