The pound extended its decline to slide below $1.12, the currency’s weakest point since 1985, as the economy heads into a recession and the government prepares a mini-budget in which it promises a number of tax cuts.

Friday’s 0.75% drop takes the year’s decline to more than 17%, putting the currency on track for its worst year since 2008, when it lost more than a quarter of its value per month. against the dollar.

The pound’s fall on Friday outpaced the euro’s 0.6% decline against the dollar in early trading.

Much of the move is due to the strength of the dollar, which is at its highest against a basket of peers since mid-2002, propelled by concerns about the global economy and aggressive interest rate hikes of the US Federal Reserve.

On Friday, the dollar index rose 0.5% to bring its monthly gains to 3%. The index rose 17% over the year.

Britain’s economy has weakened in recent weeks, with the Bank of England now estimating that it has contracted for two consecutive quarters in what would technically be a recession.

The central bank this week raised interest rates by 50 basis points to 2.25%, the highest since 2008, meaning borrowing will become more expensive for businesses and households. He expects inflation to peak at 11% in October, from 9.9% currently, a nearly 40-year high, which will further erode real household incomes.

Britain’s Chancellor Kwasi Kwarteng will try to provide a shock cure for Britain’s sluggish economy on Friday, with a 30-point growth agenda to turn “the vicious cycle of stagnation into a virtuous cycle of growth”.

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