The British Pound has lost over 15% of its value this year against the US Dollar. It recently declared its worst month since 2016 during the Brexit votes. While at that, the Bank of England has increased interest rates up to six times in the last couple of months and there are still expectations of more increases to prevent inflation from going absolutely out of control.

The UK is already in a Recession 

A business lobbyist organization says the UK is already experiencing a recession as it points to the high cost of energy as evidence. The spending capacity of households has dropped sharply, and it has caused a number of industrial actions in different sectors over the high cost of living.

As soon as the winner of the Premiership race gets announced on Monday, investors will begin their sharp lookout. They want to see if the first set of policy implementations would increase or accelerate the UK’s economy. 

It is likely that the frontrunner, Liz Truss, is announced as the new Prime Minister. Economic strategists are worried that Truss might venture into heavy borrowing in order to finance the tax cuts. This would send the country’s balance sheet into chaos.

A Standard Bank official, Steven Barrow, said Truss will be handed the economic baton during a time of incredible difficulty. He said further that the Pound already has frailties, and she could simply leave the baton soon after assuming office.

The Pound Enters a Record Low

Following the sharp fall this year, the British Pound trades under $1.15. It is now close to its lowest trading level not seen since 1985. A momentum gauge suggests that sellers are still in control of the market. 

The currency’s weakness has increased the cost of importation and fuels the high inflation.

Rates on government bonds for two years skyrocketed beyond 3.1%. This is the highest since the 2008 financial crisis and it dampened investors’ that they had seen the end of the sell-offs. Expectations around the Bank of England’s interest rate increment have increased further, according to statistics, and it will lead to rates getting over double their current state before the year ends.

Meanwhile, the FTSE 250 record is on its way to the highest underperformance ever against the FTSE 100. FTSE 100 gets support from energy and mining companies that benefit from high costs, and exporters benefiting from the Pound’s fall.