Sterling could plunge to parity with dollar

Sterling could plunge to parity with dollar

Woman holds British pound banknotes in this illustration taken May 30, 2022. REUTERS/Dado Ruvic/Illustration

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LONDON, Sept 23 (Reuters) – The UK risks a confidence crisis in its currency and sterling could sink to parity with the dollar, Citi said on Friday, after the UK government announced a series of tax cuts financed with tens of billions of pounds more in borrowing.

The pound dropped 2.2% to as low as $1.10 on Friday , a new 37-year low, meaning a move to parity would mark another 10% drop. Sterling’s all time-low is around $1.05.

“We think the UK will find it increasingly difficult to finance this deficit amidst such a deteriorating economic backdrop; something has to give, and that something will eventually be a much lower exchange rate,” Citi analyst Vasileios Gkionakis said in a research note.

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Reporting by Tommy Reggiori Wilkes; Editing by Amanda Cooper

Our Standards: The Thomson Reuters Trust Principles.

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