Skip to content
Search

Latest Stories

Pound hits record low versus dollar, markets hit by recession fears

The pound fell below $1.10 for the first time since 1985 as new finance minister Kwasi Kwarteng announced his controversial mini-budget.

Pound hits record low versus dollar, markets hit by recession fears

The pound hit a record low against the dollar Monday on surging fears about the UK economy after the government unveiled a huge tax-cutting budget.

The selloff came as equity markets across Asia and Europe fell again owing to a growing expectation that central bank interest rate hikes to fight runaway inflation would lead to deep and painful recessions. Oil also suffered more hefty selling.


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

The moves sent equity markets deep into the red again after officials reiterated their focus on fighting inflation, even if that means causing a recession.

But the biggest casualty of the week was the pound, which fell below $1.10 for the first time since 1985 as new finance minister Kwasi Kwarteng announced his controversial mini-budget.

It then extended the losses Monday to briefly touch an all-time low of $1.0350 in Asian trade after he said he intended to unveil further reductions, despite his budget causing ructions on London's markets.

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

Now, observers are warning that the pound could fall even further.

"The pound's crash is showing markets have a lack of confidence in the UK and that its financial strength is under siege," said Jessica Amir, of Saxo Capital Markets.

"The pound is a whisker away from parity and the situation is going to only worsen from here."

Kwarteng, who was appointed by Liz Truss after she became prime minister earlier this month, said he planned to slash taxes to kickstart the British economy and provide cash to cushion families from rocketing energy costs.

But investors were spooked by the huge amount of borrowing likely needed for the multi-billion-pound package, which critics said would benefit the rich far more than the poorest during a cost-of-living crisis.

Sterling's drop has led to speculation the Bank of England will have to step in with an emergency interest rate hike to give the currency a much-needed shot in the arm.

- 'Macau casinos soar' -

"Whether or not the UK government announcement of the biggest tax reduction since 1972... will in time yield a significant growth dividend is not something markets are yet willing to contemplate," said National Australia Bank's Ray Attrill.

"Instead, they were consumed by worries over the scale of near-term UK government financing needs, at a time when the current account deficit is running at more than eight percent of GDP."

He added: "Chatter about a possible UK sovereign rating downgrade has already begun."

And former US treasury secretary Lawrence Summers was scathing of Britain's recent monetary policy decisions.

"It makes me very sorry to say, but I think the UK is behaving a bit like an emerging market turning itself into a submerging market," he told Bloomberg Television's Wall Street Week last week.

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

The collapse in sterling came as markets across the world are sent into a spin by recession worries caused by a sharp tightening of monetary policy by central banks fighting decades-high inflation.

New York's three main indexes ended well down, with the Dow at a two-year low, and Asia followed suit.

Tokyo shed more than two percent as traders there returned from a long weekend break, while Seoul was off more than three percent, with Sydney, Shanghai, Mumbai, Singapore, Taipei and Jakarta also tanking.

Hong Kong was also down having reversed early gains that came after the city said it would relax strict hotel quarantine measures for international travellers.

Still, Macau casino stocks rallied as the city said it would accept Chinese tour groups again from November, having been blocked during the pandemic.

London edged up tentatively after Friday's hammering, while Paris and Frankfurt were also higher.

Oil prices ticked lower, extending the big losses suffered Friday as expectations that a recession is looming hammer demand expectations.

The surging greenback added to the sell-off in crude, which is priced in dollars and therefore ore expensive for buyers using other currencies.

Both main contracts are sitting at their lowest levels since January, having wiped out all the gains seen in the wake of Russia's invasion of Ukraine.

Black Gold Investors' Gary Ross described the strong dollar as "a wrecking ball for commodities".

(Reuters)

More For You

Covid inquiry begins probe into care home deaths

FILE PHOTO: A mother and daughter sit atop the Covid memorial wall on September 9, 2024 in London, England. (Photo by Carl Court/Getty Images)

Covid inquiry begins probe into care home deaths

THE Covid inquiry has started examining how the pandemic affected care services for older and disabled people, with families describing the crisis as one of the worst failures of the pandemic.

Nearly 46,000 care home residents died with Covid in England and Wales between March 2020 and January 2022, with many deaths happening in the first weeks of the outbreak.

Keep ReadingShow less
Starmer and Glastonbury condemn anti-Israel chants by Bob Vylan

Keir Starmer speaks to members of the media during a visit to RAF Valley, on Anglesey in north-west Wales, on June 27, 2025. PAUL CURRIE/Pool via REUTERS

Starmer and Glastonbury condemn anti-Israel chants by Bob Vylan

PRIME MINISTER Keir Starmer and Glastonbury organisers said on Sunday (29) they were appalled by on-stage chanting against the Israeli military during a performance at the festival by Punk-rap duo Bob Vylan.

During their show on Saturday (28), the duo chanted "Death, death, to the IDF" in reference to the Israel Defense Forces, the formal name of the Israeli military.

Keep ReadingShow less
Pakistan floods

A flooded street near Station Road after heavy rainfall in Hyderabad, Pakistan, on June 27, 2025.

Getty

Pakistan reports 45 deaths from flash floods and rain in monsoon onset

AT LEAST 45 people have died in Pakistan over the past few days due to flash flooding and heavy rainfall since the beginning of the monsoon season, according to disaster management officials on Sunday.

The highest number of deaths was reported in Khyber Pakhtunkhwa province, which borders Afghanistan. There, 21 people were killed, including 10 children.

Keep ReadingShow less
UK Weather Alert: June Heatwave to Hit 34°C, Breaking Records

The UK is bracing for potentially one of the hottest June days on record

iStock

UK set for one of the hottest June days with highs of 34°C

Key points

  • Temperatures may hit 34°C in Greater London and Bedfordshire
  • Amber alert in place across five regions due to health risks
  • Wimbledon’s opening day to be hottest on record
  • Risk of wildfires in London labelled “severe”
  • Scotland and Northern Ireland remain cooler

Hottest June day in years expected as second UK heatwave peaks

The UK is bracing for potentially one of the hottest June days on record, with temperatures expected to reach 34°C on Monday (30 June). The ongoing heatwave, now in its fourth day, is most intense across the South and East of England, particularly in Greater London and Bedfordshire.

Although there is a small chance of temperatures hitting 35°C, they are unlikely to surpass the all-time June record of 35.6°C set in 1976.

Keep ReadingShow less
Air India flight crash
Air India's Boeing 787-8 aircraft, operating flight AI-171 to London Gatwick, crashed into a medical hostel complex shortly after take-off from Ahmedabad on June 12.
Getty Images

Probing all angles in Air India crash, including sabotage: Minister

INDIA’s junior civil aviation minister said on Sunday that all possible angles, including sabotage, were being looked into as part of the investigation into the Air India crash.

All but one of the 242 people on board the Boeing 787-8 Dreamliner were killed when it crashed in Ahmedabad on June 12. Authorities have identified 19 others who died on the ground. However, a police source told AFP after the crash that the death toll on the ground was 38.

Keep ReadingShow less