LONDON — The U.K. risks a currency crisis that could see sterling reach parity with the dollar, according to analysts at Citi.
The U.K. government announced the most significant program of tax cuts in decades Friday morning, as Finance Minister Kwasi Kwarteng said the Treasury was targeting a 2.5% trend in growth. British economic growth has been sluggish in recent years, and the Bank of England on Thursday said it was likely in a recession.
However, traders appeared to panic over the prospect of the U.K. increasing its already record-high debt-to-GDP ratio as it spends additional billions on economic support for households and businesses amid the European energy crisis, with government bond yields rising at the highest daily rate in over a decade.
By 4 p.m. London time Friday, the pound had lost more than 3% against the dollar, marking a fresh 37-year low of $1.0915. It was last at this level briefly in 1985, when it weakened on the back of interest rate hikes in the U.S.
Continue reading Citi says sterling-dollar parity is possible as UK risks currency crisis on CNBC
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