What does the plunging pound mean for YOU? Q&A as Sterling slumps to record low against dollar
>
The pound has fallen to its lowest level against the dollar since decimalization began in 1971.
It fell to just $1.0327, even below the 1985 $1.0545 baseline, sparking panic in some markets.
But some members of the public aren’t sure why this is causing such an effect and why it matters what the US currency stands for compared to the pound.
Here’s how MailOnline takes a look at some of the key questions and what it can do for you:
The pound has fallen eight percent since Liz Truss was elected prime minister three weeks ago and has fallen nearly 25 percent since the start of the year. It’s a similar story for the euro
As the markets opened, the pound fell toward parity with the dollar before rising again to around $1.06
The Statue of Liberty over the New York Cityscape, a popular British tourist destination that will now be more expensive
American tourists could be attracted to the UK because their dollars go so much further
Why has the pound fallen?
The pound plunged in direct response to Chancellor Kwasi Kwarteng’s so-called mini-budget on Friday, which announced the biggest tax cuts in the past 50 years.
Why did it get worse on the weekend?
Although there was an initial drop following the Chancellor’s announcement, sterling started to gain a little bit. However, Mr Kwarteng’s remarks over the weekend that further tax cuts were to come pushed a further decline.
Why Does It Matter – Could It Get Worse?
It is widely expected that if the pound does not rise, the Bank of England will raise interest rates, meaning debt will become more expensive and affect many things, including mortgages.
Will the Falling Pound Affect My Trip?
Yes, since it has fallen so dramatically compared to the US dollar, it will hit hard-working families in the pocket, especially if they travel abroad to America.
British Finance Minister Kwasi Kwarteng attends an interview with Laura Kuenssberg yesterday
Prime Minister Liz Truss delivers a speech to members of the United Nations in New York on Wednesday during her visit to the US
Will it only be the trip to America that will be affected?
Obviously, tourism to the United States will be affected with more expensive vacations and services and goods, when more expensive ones there later on. But there will be another knock-on effect for other countries that could be on people’s destination lists. Panama, Qatar and Saudi Arabia are among the countries that have pegged their currencies to the dollar.
Will it make things more expensive here in Britain?
Britain imports more than it exports, so the falling pound will have a big impact on the cost of those items. Because the pound is so weak, anything imported from the United States will cost more to catch up to the right value before the fall.
What kinds of things can get more expensive?
Currently – for the most recent figures of 2021 – machinery, nuclear reactors and boilers are imported from America at a cost of about $12.94 billion. Mineral fuels, oils and distillation products make up a large number of products coming in, also accounting for about $7.97 billion. It means that stores here have to pass those costs on to customers, which means an increase in some prices.
Will food cost more?
All food imported into the UK will be more expensive as the value of the item will remain the same despite the pound being worth less.
Ingredients imported from the US will be more expensive and food will be more expensive
Beer – especially craft drink – will rise as much of the hops used come from the United States
Does this make it more expensive to go to a restaurant?
Yes, any additional costs of imported ingredients must be passed on to paying customers.
How about a drink to ease your worries?
No, even the cost of a pint of beer could be hit hard by the falling pound due to production costs.
Will drinks made in England be good because they are not imported?
Even these can be affected by the issues with sterling as ingredients are sourced from abroad. Paul Davies, chief executive officer of Carlsberg Marston’s Brewing Company, said, “A lot of the hops used in this country are actually imported and a lot of it, especially for craft brewers, is imported from the United States.”
Are there any benefits to the inequality between sterling and dollar?
There are some potential knock-on effects that could bring about an improvement in the UK economy.
The weaker pound could entice US tourists to drop by as they get more for their money
It means there’s a chance the economy will be boosted and could eventually be good news
Will it encourage American tourists to come and visit?
Yes, tourists from the United States get more bang for their buck if they decide to stop by. Accommodation will seem cheaper, as will food, services and attractions.
How will this help the situation here?
The more money is spent, the healthier the economy becomes, hopefully leading to the Bank of England cutting interest rates.
Are there any other silver liners?
Possibly the weakness of the pound could make UK exports more attractive to US buyers. Those who buy products from the UK will experience a ‘better value’ effect which could see more trade. Again, this could give the economy a boost.