When a currency plunges into crisis, it is common to seek out someone to blame. Eight years ago, in Ghana, “dwarfs” and “black magic” took some of the heat for a collapse in the cedi. In Turkey, President Recep Tayyip Erdoğan has frequently lashed out at a shadowy “interest rate lobby” for its supposed efforts to hammer the lira. In both cases, market-unfriendly policy mixes were more obvious culprits.
Now the pound is feeling the sting of financial market opprobrium. Like every other major currency, it has been under pressure against King Dollar for months. (Energy independence and a hawkish central bank are wonderful things for those who like the old “buy dollars, wear diamonds” adage.) But Friday’s woefully misnamed “mini-Budget” pushed sterling firmly over the edge.
It tanked by a massive 3.5 per cent against the dollar after new UK chancellor Kwasi Kwarteng cut taxes and boosted borrowing to juice up economic growth and fund the country’s response to the energy crisis.