The Pound Sterling, currency of the UK fell in the early hours of Monday 26th September to a record low against the US dollar. This astronomical flop is thanks to the stock markets reacting to Chancellor Kwazi Kwarteng’s massive tax cuts - the biggest since the 1970’s. 

As markets opened in Asia which is up to 8 or 9 hours ahead of the UK the pound dropped from its already precarious position at $1.08 to £1.00. Just before 1am UK time this morning one pound fell from $1.07 to a mere $1.03. This is the lowest the pound has ever been against the dollar. By the time the UK was waking up the currency had regained some ground, in the small hours of Monday after the plunge, sterling struggled upwards to $1.06 to £1.00. 

This has happened for not just one reason. The dollar has been stronger than European currencies and this caused the Euro too to hit a 20-year low against it in Asia as the markets opened up. This low for the continental currency is also thanks to investors becoming concerned about what the risk is of a recession in Europe as the winter is approaching with both the cost of living crisis and the war in Ukraine showing no sign of letting up. 

Because of the drop in sterling, goods coming across the pond will be more expensive, especially oil and gas. With Kwazi Kwarteng’s massive tax cuts, the concerns are that the already skyrocketed inflation, at a 40-year peak of 9.9%, will be encouraged further by this, and a large amount of government borrowing. 

To compensate for the inflation the Bank of England would have to raise its interest rates even more which will make monthly mortgage instalments for millions of property owners. 

The falling pound is a big concern, not only for exchanging for holidays but if the pound isn’t worth as much as it usually is, it will put up the cost of importing overseas goods. This could affect not just businesses but you too. iPhones that are sold by an American company and made in eastern Asia will get more expensive in the UK. It can also affect goods that are not even assembled abroad, just some parts come from other countries. 

So keep an eye out for the pound and the exchange rates, not only when its time to go on holiday but consider why so much you buy has gone up, again.