British Pound hits 5-year low against US Dollar


It is not often, nor prudent, to use superlatives to describe the movements of major currencies against each other, however today it can certainly be a time when a superlative is appropriate do describe the performance of the British Pound and its seemingly unstoppable race to the bottom.

Using the word 'tanking' to define the performance of a national economy or currency is somewhat drastic, but in recent weeks, the British Pound certainly has been tanking.

And tank it did again this morning.

As the markets open in London today, the British Pound begins the day at 1.15 against the US Dollar, representing the lowest value that it has reached in more than five years.

In March 2020, when incumbent Prime Minister Boris Johnson and his now infamous aides Chris Whitty and Matt Hancock rolled out the yellow booths and continued to justify their draconian lockdowns which decimated the economy, the British Pound's value only reached a low point of 1.23 against the US Dollar, which is still considerably higher than its value today.

Given that the lockdowns took place in other Western countries at the same time, it is important to note that the British government frittered away over £400 billion of national funds on white elephant projects to keep people out of their places of employment such as furlough, state-backed loans to small businesses and Orwellian track and trace systems.

This emptied the coffers and along with the almost two years of disrupted industry and low productivity as well as a continuing apathy in which tens of thousands of employees are still not going to their offices, the piper now has to be paid.

The British government got itself involved in the geopolitical activity in Russia and Ukraine, and in doing so created its position as an 'unfriendly' country to oil producing Russia, meaning a massive rise in energy prices, although this was mainly a knock-on effect from mainland Europe which relies on Russia for 40% of its natural gas whereas the UK only relies on Russia for less than 10%.

Even so, this situation has created high energy prices, and let's not forget that over 30 energy firms exited the UK market in the third quarter of 2021, many of them having entered administration, creating a market which lacks competition.

The cost of living crisis and spiraling inflation, unaffordable energy bills and low productivity has now created the bearish sentiment in the minds of investors and traders, and the British Pound languishes at a very low point.

It would of course be easy to state that the United States had lockdowns too, and that it also is intent on showing that it wishes to prolong hostilities with Russia, however some US states had no lockdowns at all (Florida and Texas, two of the most populous and highly industrialized states in the Union being two of them), and the productivity levels in the United States are still high.

Yes, inflation is still at its highest point since the 1980s but it is nowhere near as high as that in most mainland European nations, and certainly not as high as that in the United Kingdom which, according to some commercial bank analysts is heading for 18% or more by January this year, with interest rates possibly rising from 1.75 to over 7% next year.

Should that occur, there will likely be an unsustainability in repayment of domestic and commercial loans, hence the lack of confidence in the Pound and general performance of the British economy in the immediate future.

The question is, will we see parity?

Trade over 50 forex markets 24 hours a day with FXOpen. Take advantage of low commissions, deep liquidity, and spreads from 0.0 pips. Open your FXOpen account now or learn more about trading forex with FXOpen.

This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.

Latest from Forex Analysis

European Currencies Adjust to Support Levels: Is Growth Possible? NZD/USD Exchange Rate Falls from Nearly 5-Month High Market Analysis: GBP/USD and EUR/GBP Poised For More Losses Dollar Falls After Inflation Data: Is a Change in Medium-Term Trends on the Horizon? USD/CAD Retracts from Nearly 2-Month High

Latest articles


TSLA Shares Revive After Shareholder Meeting

Last week, Tesla held a shareholder meeting where the main events included:
→ Shareholders approving Elon Musk’s $56 billion compensation package in TSLA stock options;
→ Relocating the company’s legal headquarters to Texas;
→ Elon Musk’s statements on robotics, asserting

What Is a Petrodollar and How Does It Affect the Global Economy?
Trader’s Tools

What Is a Petrodollar and How Does It Affect the Global Economy?

The concept of petrodollars is an insightful topic to study. The petrodollar isn’t a specific currency but a financial system that reflects economic and political forces that have shaped international relations for decades. This concept is critical to understanding


Nasdaq 100 Index Reaches 20,000 Points for the First Time

On 30 May, we noted some uncertainty in the price behaviour of the Nasdaq 100 (US Tech 100 mini on FXOpen) near the resistance level of 18,840, as shown by arrow #1.

Following this, the price declined and tested

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 60% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.