The British pound slid to its lowest level against the U.S. dollar since 1985, a reflection of the U.K. economy’s dire economic situation. Investors are braced for sterling to weaken even further to a nadir not seen in more than two centuries of trading across the Atlantic.
The pound GBPUSD, 0.00% fell 0.3% in early Monday trading in Asia to $1.1475, according to FactSet. That is the lowest since 1985. Sterling’s descent is in part a side effect of the relentless U.S. dollar rally, which has driven both the euro and Japanese yen to multidecade lows in recent days.
But the problems are also homegrown. The U.K. faces an energy crunch that threatens to leave many households unable to pay their bills this winter. Uncertainty over both the economic policies the U.K.’s next prime minister will enact and the Bank of England’s ability to control sky-high inflation are compounding the pound’s weakness.
“The economic challenges facing the U.K. economy are probably of a magnitude as great as anything we’ve seen in living memory,” said Mark Dowding, chief investment officer of BlueBay Asset Management.