THE appointment of Liz Truss as the new British Prime Minister (pictured above) will help sink the beleaguered pound even further – and the trajectory is likely to only get worse for the UK currency, warns Nigel Green, CEO of deVere Group.
The world’s largest independent financial advisory, asset management and fintech organisation offered this bleak warning as Truss succeeds Boris Johnson.
Green said:
“Already one of the worst-performing currencies of the year, the pound on Monday dropped to the weakest it’s been since 1985.
“Of course, part of the reason is that Russia has indefinitely shut down the Nord Stream 1 gas pipeline to Europe as the G7 agrees to impose a price cap on Russian oil exports.
“However, there’s also no getting away from the fact that the UK currency is going to react negatively to the country’s new Prime Minister – even if there’s a brief relief bounce on the fact that at least the leadership contest is over. Any honeymoon will be extremely short-lived.”
Truss’s unfunded, pie-in-the-sky tax cuts and massive spending plans mean big rises in borrowing.
He continued:
“They blow an enormous £170bn hole in Britain’s finances, and would push up inflation by increasing money growth, prompting more aggressive interest rate increases from the Bank of England as it struggles to control inflation, which is still at a 40-year high.”
Truss’s ‘populist agenda’, continued Nigel Green, including the UK’s tough stance on the relationship with the EU and single market access, and issues with the Northern Ireland Protocol, are also “driving negative sentiment for sterling”.
In an earlier comment, the deVere chief said that the new PM’s hint that she would demand a review of the Bank of England’s mandate was also weighing on the pound.
“We expect the pound – and the gilt market – to react badly to any sense of growing political interference. The politicisation of the UK’s central bank will spook markets,” he affirmed.
The deVere CEO urged those with heavy exposure to UK financial assets to “review their portfolio as it’s time to buckle up”.
Truss is helping to tank the pound and we expect it to get a lot worse for the UK currency, before it gets better.
Photo credit : https://members.parliament.uk/member/4097/portrait
Ralph Morton is the leading journalist in the leasing broker sector and editor of Broker News, the website which provides information and news for BVRLA-registered leasing brokers. He also writes extensively on the fleet and leasing market in both the UK and Europe.
