26 September 2022
If you are covering the news that the pound has fallen to a record low against the dollar, please see the following comment from Paul Craig, portfolio manager at Quilter:
"The market has signalled that the fiscal expansion announced at the mini budget on Friday is a risky gamble and the pound has sunk even further from its 37-year low on Friday.
"While this is certainly a reaction to the announcements last week, we must remember that there was also another sharp decline in gilt prices as an expected increase in debt financing scares investors. The pound is also suffering from a stronger US dollar, which many other currencies are also facing. On top of this, the BoE lags the US Federal Reserve’s aggressive tactics to try and keep inflation tamed and this will similarly be cause for concern for investors as UK inflation shoots higher than other developed markets which hardly provides a welcome mat for the pound.
"If we do see the BoE get its interest rate guns out, we may start to see some interest in the pound return. Otherwise foreign holidays may start to be seen as a new status symbol. Whether or not Kwasi’s shock mini-budget kick starts the economy only time will tell, but for the now the market is not giving him the benefit of the doubt."
