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Searing UK inflation is driving pound near a 37-year low

by WOOWinvest
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Searing UK inflation is driving pound near a 37-year low

It’s starting to look like nothing can stop the British pound from sinking to new lows. With talk about inflation surpassing 18% next year and families across the country likely to be pushed into energy poverty this winter, the UK’s economic woes are getting worse by the day.

The consensus among traders is that the Bank of England will have no choice but to force the economy into a severe recession and cause widespread job losses to rein in price pressures. It’s put historic lows for the pound within reach.

The currency is trading around $1.18, less than 4 US cents away from its weakest level since 1985 against the dollar, underscoring the challenges facing the British economy and the next prime minister.

The BOE is already forecasting a five-quarter recession starting later this year.

“Is there more downside? Yes, absolutely,” said Geoff Yu, senior currency strategist at Bank of New York Mellon Corp. “Even if things improve, sterling can’t return to where it was in the past of $1.40 or $1.45. That’s going to be very hard to achieve.”

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