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It hasn\u2019t been a good Monday morning for some investors or English travelers who wish to sell the GBP to go abroad, as the Sterling Pound has collapsed to record lows to bring almost perfect parity with the U.S Dollar at 1 GBP equals $1.09. Sterling fell to the lowest level in 37 years, trading below the $1.09 following the rate increase.<\/p>\n
The cause to fight against inflation was always going to bring unwanted consequences to countries\u2019 currencies and economies. The most recent example has been the effect on the GBP after the Bank of England announced a rate hike of 0.5% to lift current interest rates from 1.75% to 2.25%, the biggest since 2008.<\/p>\n
It is compounded by the U.S Dollar recent record heights, it comes as the greenback surged to a fresh 20-year high against its peers after the Federal Open Market Committee lifted its key rate by 0.75 percentage points for the third time in a row and projected further increases in borrowing costs in an effort to tame inflation.<\/p>\n
America\u2019s strategy is different by the fact they want to keep unemployment low, at the same time of attacking inflation, this is different from the BoJ, Bank of England whose sole purpose is to keep inflation at around the 2% level.<\/p>\n
The cost of UK government borrowing rose by the most in a single day for at least a decade, while the currency meltdown fueled speculation the Bank of England would be forced to launch an emergency rate rise to mend the UK\u2019s battered credibility with global investors. The UK government borrowed \u00a311.8bn last month, almost twice as much as the Treasury\u2019s independent forecaster had expected, as high inflation pushed interest payments to an August record.<\/p>\n
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