On Monday, the British pound collapsed by almost 5% against the dollar – to a record low of $ 1,0384. Subsequently, the currency recovered somewhat to the level of $1.0882. Analysts note that the current collapse of the pound was the biggest intraday drop since March 2020, when the markets were panicked due to the outbreak of the COVID-19 pandemic. The UK currency depreciated after the country's Finance Ministry promised to continue tax cuts, which will affect individuals and legal entities and increase the budget deficit. This has raised fears that the new policy will lead to a sharp increase in inflation and public debt. «The collapse of the pound shows that the markets do not trust the UK. Now the pound is a step away from parity with the dollar, and the situation will only worsen further,» said Jessica Amir, a strategist at Saxo Capital Markets. In total, this year the British pound has already fallen in price by 20% against the US dollar. Such a drop even surpassed the collapse that was observed after the vote on the country's withdrawal from the European Union (Brexit) in 2016. Then the UK currency depreciated by about 16% over the year.
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