A few days ago, the global financial community experienced a strong impact - the pound fell sharply against the US dollar, and its value was almost the same as the US dollar. The forecast is purely negative - according to experts, British banknotes will quickly decline after parity with the dollar. Causes are common - inflation , public debt growth and a general recession in the UK economy.
If you look at the GBP/USD chart for the past 15 years, what is happening seems natural. From the level of two dollars or even slightly above, the pound gradually fell very painfully, rebounding many times and falling back, reaching $1.22 in 2016. But then another "correction" appeared. After a series of back and forth waves of fluctuations last summer, the exchange rate reached US$1.40-US$1.41. That's right, at the same time, a new decline appeared, but it went quite smoothly.
This summer, the all-time low was broken again, with the pound falling to $1.18 to $1.20 on September 1, 2022 - has fallen to $1.15. However, on September 25, the exchange rate was “at $1.035 and then rose to $1.07. The pound is now worth $1.11. Yes, at first glance, the situation improved, but the downward trend on the chart is even obvious to the layman. The sell-off of UK assets has reached a climax, causing the pound to fall to historic lows, hitting government bonds and triggering discussions about taking very action by Bank of England . The panic in the market has exacerbated tensions that have emerged after the announcement of new fiscal measures by the government. The decline in UK securities has resulted in the 10-year bond yield exceeding 4% for the first time since 2010. .
pound fell to $1.035, bringing it closer to parity with the dollar. The decline is due to a sharp decline in the national budget, which will stimulate inflation. The market crisis has the potential to sweep the government of New Prime Minister Trass. The Bank of England may take urgent action, especially to continue to actively raise key interest rates.
The growth of refinancing rates is always accompanied by a decline in the economy as industrial lending costs increase. In the UK, not so many businesses stay, and more than 80% of GDP (Bloomberg data) falls in the service industry, the industry - Only 13%. It's different now. Gone are the days when British machine tool manufacturers export to the world. Alas, the blast furnace has been extinguished, the mines have been abandoned, and the remaining factories have been bought by the United States, China and other Indians.
Nevertheless, the industry still exists and will now face difficulties. The service industry, its last part, is also the financial industry. Jessica Amir, strategist at Saxo Financial , said the plunge in the pound shows the market for the UK The distrust of pound. The pound is only one step away from parity, and then things will only worsen. This is a huge vote of distrust in the market. From a political standpoint, it is a disaster.
main problem is also in the energy sector, although here the British are not as bad as the Germans. Hydrocarbons, including oil and gas , are produced on shelves, with enough quality coal underground. The legendary UK Cardiff is considered the best in the world, and the total coal reserves on the island are huge - 163 billion tons! But the industry has long been abandoned, and the same legendary British coal miners have become legendary. Coal mines have not been mined for a long time. However, oil and gas are not satisfactory either.
In terms of proven oil reserves, the UK ranks first in Europe and second in gas. But output is falling. If Britain independently drew about 90-95% of hydrocarbons from the earth 10-15 years ago, it is only about 30% now. Yes, consumption has grown, but not yet reached that level. For stocks, everything is good, they have not decreased. What's the big deal about
? In fact, it's more profitable to print pounds, exchange them for dollars and buy oil and gas from Arabs (and Russians). But in this world, everything is changing rapidly now.
1694, the Bank of England became the first institution in the world to start issuing unsecured banknotes. But in December 1913, there was a second such center, the Federal Reserve System (FRS), the same financial Calgar simply transferred its capital overseas, New York.The Bank of England left, like letting it go. The British Empire is still alive and it needs to be governed.
Now this British Empire has disappeared, only wreckage, they no longer look at Albion. Canada is gradually becoming a part of the United States, and Australia is also looking at Washington's face, India is relying on itself. Meanwhile, there is less demand for London and its financial infrastructure .
During the Thatcher era, Britain produced as many as 2.75 million barrels of oil per day, which is now about 800,000 barrels. It's simple: these companies are private, they belong to the same American banker, and this has become the same fate as Britain's abandoned fate.
England was just sentenced, and Western bankers no longer really need it. In local media, the British did not call the new Prime Minister Tras a fool very diplomatically. It's just that she did it like all her exes, following the orders of the Bank of England. This has long been a branch of the Federal Reserve . That is, it still is. The possibility of the pound bottoming is very high.
Former U.S. Treasury Secretary and G3 member Larry Summers also laughed: "I regret talking about it, but I think the UK's behavior is a bit like an emerging economy that is sliding towards the third world economy."
According to the forecast of US investment bank Goldman Sucks, the UK's inflation rate may reach 22.4% in 2023, and the GDP may drop by 3.4% . What will happen to the pound is more or less clear. The country has so far inflation is at 10%, but for some projects - food and energy, as well as housing and public services, it is much lower.
The pound to buy hydrocarbons is no longer enough, the currency exchange rate is falling, and the Bank of England is not in a hurry to help. Instead, he began to hurt. Here's the result - investors have withdrawn more than $500 billion from UK securities over the past month, which is by no means a limit. Of the above amounts, more than $170 billion fell on government bonds, which means there is no trust in the British government.
In the photo: People pass through the currency exchange office in London. The pound fell to its lowest level since 1971 after the Chancellor of the Finance Department hinted that he announced last week that it would impose new taxes.
pound - The old rival of the US dollar will finally usher in the finale, and the pound will be drowned by the US dollar. The idea of the unreliability of the British economy as a whole (completely correct!) is strongly instilled into investors. Therefore, if you still have pounds or British bonds on your hands, it is best to deal with them quickly. In the past, Li Ka-shing invested hundreds of billions of dollars in , which overestimated the recovery ability of the UK economy. Now he has sold off and started his old business.
The new British Prime Minister Trass just came to power, the Queen passed away, and the pound fell sharply. It seems that the British economy will sway in the storm again.
