The pound hit a new low against the dollar on Monday – the financial equivalent of a vote of no confidence in new Prime Minister Liz Truss.
The big picture: Britain’s unexpected Brexit vote in 2016 to leave the European Union served as the starting point for the current era of growing global uncertainty.
- The referendum destroyed long-established systems that guided the country’s trade, economic policy and political relations.
Driving the news: The pound – the bedrock of London’s status as a global financial center – briefly dipped to a new low of 1.04 against the dollar.
- The pound is down more than 20% against the dollar this year alone.
- Truss’s plans relied heavily on tax cuts – which would mean the government would have to borrow more – but did not appear to include many details on how such borrowing would boost the Great Britain’s long-term economic prospects. -Brittany.
- Truss’ Tory government – like many governments across Europe – faces the task of trying to manage soaring inflation and an energy crisis.
Yes, but: Just because Britain has been battered in the markets in recent days does not mean that all of the government’s plans to deal with tough economic conditions will be treated the same.
- Truss has repeatedly criticized mainstream economic orthodoxy and recently sacked one of Britain’s top Treasury officials, further confusing investors.
What we are looking at: Whether other governments will get the Truss treatment from financial markets if they announce efforts to run larger deficits.
Go further: UK tax cut proposals impact all markets