The pound fell below pandemic lows against the dollar on Monday morning, hitting a multi-decade low.
This means that it has been 37 years since British holidaymakers have been in the US, and importers bringing their products into the UK are hardly worth a pound.
It briefly fell below 1.14506 on March 19, 2020 to a low of $1.1443 per pound.
Imports will be quite expensive for Britons in the fall, as much of the world’s trade is transacted in dollars.
Back in 1985, the last time the pound fell, countries worked together to deliberately weaken the dollar against international currencies, particularly against Germany’s Deutsche Mark and the Japanese Yen.
In the so-called Plaza Accord, named after the New York hotel where it was signed, the G5 countries, Germany, the UK, the US, France and Japan agreed to work towards devaluing the dollar.
Five years of rapid growth in the U.S. currency hurt U.S. manufacturers as imports became cheaper for U.S. customers to buy.
Markets.com analyst Neil Wilson said: “There will be no Plaza Accord to save us this time.
One analyst said the appointment of Liz Truss could lead to a short-term pushback, but will look to the announcement of a new Conservative leader later Monday, which could put further pressure on the pound. .
“If Liz Truss’ win is confirmed, we will see profit taking and sterling ‘sell the fact’ rally,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
But she argued that in the long run, Mr Truss’ prime ministership was likely to be bad for the British pound.
Ozkadeskaya said the Bank of England’s mandate could be moved away from inflation control and focused on growth.
“As the dollar continues to rise relentlessly, we expect the pound to continue its journey towards leveling against the US dollar,” she added.
Fiona Cincotta, senior financial markets analyst at Citi Index, said before the pound fell to its lowest level in almost 40 years.
“However, the pound, which is trading at its lowest level since March 2020, suggests the market is concerned about her strategy of cutting taxes to boost the economy.
“This could easily backfire and push inflation even higher.”
Meanwhile, the euro also fell below $1 on Monday for the first time in 20 years.
This is because economies across Europe are being hit by high gas and electricity prices due to the war in Ukraine and several other factors.