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Pound slides ahead of British PM Truss’s energy plan


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LONDON — The pound on Thursday was sliding back towards its 37-year low hit the day before, ahead of the announcement of new policies designed to deal with the rising cost of energy in Britain and a very closely watched meeting by the European Central Bank.

Sterling was at $1.1486, down 0.42% and heading back towards the $1.1407 it hit on Wednesday, its lowest since 1985.

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The euro, which similarly has been plunging versus the greenback, hit a fresh two-and-a-half month high on the pound of 86.95 pence.

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New Prime Minister Liz Truss is due to announce plans to cap soaring consumer power bills on Thursday and promote new sources of energy in an expected 100 billion pound ($115 billion)-plus package designed to limit the economic shock caused by the war in Ukraine.

She is expected to set out her plan to lawmakers at around 1000 GMT, and investors are closely watching how it will be funded.

“While in theory this (Truss’s plan) could be perceived as a clear positive for the UK economy in the near-term and provide a source of encouragement for the pound, as it would help stave off the risk of a deep recession, investors are yet to see it that way,” said Matthew Ryan, head of market strategy at Ebury

“The issue for market participants is that such enormous spending would place a huge burden on the UK’s already strained finances, merely swapping near-term gain for long-term hardship,” he said, though he noted markets could be waiting for more concrete information before committing to positions.

The day’s other main event is a meeting by the European Central Bank. Markets are waiting to see whether the ECB will go for a large, 50-basis-point rate hike or a record 75-basis-point one.

(Reporting by Alun John; Editing by Bradley Perrett)


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