Pound Sterling continued to tumble after the mini-budget this morning, plummeting to below $1.10 for the first time since 1985.
Financial markets ramped up expectations for interest rates to hit a peak of more than 5 per cent midway through next year, as Citi analysis warned the mini-budget “risks a confidence crisis in sterling”, as it plummeted to a 37-year low against the dollar this morning.
Investors moved out of UK government debt sending yields higher, with two-year borrowing costing it almost 4 per cent.
FTSE 100 slid by 1.92 points after the mini-budget, in wake of consumer confidence falling to a new low this morning.
JP Morgan analyst Allan Monks said according to the Guardian, “markets expect [UK interest] rates to rise to over 5% – a reaction that cannot be explained by the mechanical impact of today’s fiscal easing alone, and instead reflects a broader loss of investor confidence in the government’s approach.”
Former US Treasury Secretary Larry Summers told Bloomberg: “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.”
“There’s nothing in the pattern of market response in the UK, that suggests anything but fear rather than confidence in the policy approaches being taken.
“It would not surprise me if the pound eventually gets below a dollar if the current policy path is maintained.”
More to follow