IMF warns UK to change course

By Matthew Boyle

It seems the Pound is on a one-way trip currently as it was sent further down once again last night. Data from the US boosted the Dollar as markets are betting the Federal Reserve will accelerate the pace at which they are hiking rates. This saw the USD gain around 2 cents against GBP, now taking it to further unprecedented lows. The Dollar is causing some serious issues for the Pound in what is already a dire situation as the UK a net importer of energy, importing goods and paying much of its debt in USD. So, while the UK is desperately trying to increase inflow into UK assets the strengthening USD is slowly choking the Pound out, literally piling its own inflationary pressure upon the UK.

To add to GBP’s woes last night the IMF released a damning statement urging the UK government to re-evaluate its proposed tax measures, stating it was closely monitoring developments in the UK.

Only highlighting just how destructive Kwarteng’s proposals could be, it said “fiscal policy does not work at cross purposes to monetary policy”. GBP>EUR dropped around a cent overnight.

Make no mistake – the Pound is in trouble, with many analysts warning only of further downside risk. Both the UK government and the Bank of England are now faced with what seems an impossible task.

With the Dollar strangling Sterling out, the Pound is destroying itself from within. And as the cold weather now sets in the cost-of-living crisis will start to show its ugly head – not only impacting lives but in other areas… GDP, retail sales and unemployment to name only a few.

Should these colder months see Covid re-appear, the impact simply doesn’t bear thinking about.

If you have currency to buy in the coming weeks, consider your position and speak to your consultant today who can help you remove risk in these worrying times.