At the time this article was first written (October 13th), 1 Pound Sterling was worth $1.12 USD. This is marginally up from its historic low of $1.07 on September 26. This is a major decrease from what it was worth just last year of $1:35. This fall may have been seen coming and there are several potential factors that could have caused this. 

 

The Brexit Vote

The first major fall of the Pound happened in 2016 after the Brexit vote where citizens voted for the United Kingdom to leave the European Union. The pound fell immediately after the vote was finalized on June 24, 2016. In a couple months after the referendum the pound fell to $1.22 USD. 

 

Covid-19 Pandemic

The pound never recovered its value after the Brexit vote and its value always stayed around $1.30 USD. But when the covid-19 pandemic was declared and everything started to shut down, the pound dropped around $1.20 USD. The pandemic affected the British economy and prevented the value of the pound from rising back up to its former days.

Tax cuts 

The British government announced tax cuts which led them to borrow more money. When a country borrows money, one of the immediate effects is the devaluation of their currency. 

 

The Queen’s Death 

The death of Queen Elizabeth ll could have hurt the pound as there would be a transition in power to her son Prince Charles lll. This leads to more costs as the county now must spend millions of pounds for the funeral and the new king’s coronation. In addition, the country now has to reprint all of the money to show the face of the new king. This is not factoring the view that the public has on the new king.

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All in all, the main reason for the fall is…

The Brexit vote, ever since the proposal and vote it was obvious that the pound had never recovered. To put it into perspective when the plan referendum was in a speech by the Queen on May 27 2015, the value of the pound was worth $1.55. 

 

On June 29, 2015, the value against the US dollar was 1.56. The next year a few days after the vote had been conducted the value of the pound against the Us dollar had fallen to $1. 33. The bill to revoke the EU bill was signed on March 29, 2017, the next day the pound was valued at $1. 25 The recent tax cuts.

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The current aftermath 

On October 20th the current prime minister, Liz, announced her resignation.

This comes after only being in office for 6 weeks. The current economic situation in

Britain could have been the motivating factor. Just four days later, the first prime

minister of Indian descent, Rishi Sunak, was appointed as the new prime minister.

The pound rose immediately to $1.13 USD after the appointment of Sunak. Only time

can tell if Rishi Sunak can revive the British economy. 

 

Sources:
https://www.nytimes.com/2022/09/28/business/economy/uk-pound-history.html 

https://www.washingtonpost.com/world/2022/09/27/british-pound-drop-dollar-us-impact/ 

https://www.bbc.com/news/business-49179234 

UK Prime Minister Liz Truss resignation: what happened in 45 days (msn.com)

Rishi Sunak to be Britain's new prime minister as rival Penny Mordaunt drops out (cnbc.com)