What a Historically Low British Pound Means for Investors Kiplinger Kiplinger is supported by its audience. When you purchase through links on our site, we may earn an affiliate commission. Here's why you can trust us.

What a Historically Low British Pound Means for Investors

The British pound sank after the U.K. government unveiled its largest set of tax cuts in decades. Here's what that means for U.S. investors. (opens in new tab) (opens in new tab) (opens in new tab) Newsletter sign up Newsletter (Image credit: Getty Images) By Will Ashworth last updated 28 September 2022 The British pound recently fell to its lowest value ever relative to the U.S. dollar. So if you're thinking of traveling to the United Kingdom for a fall visit, you couldn't have asked for better timing from a currency exchange perspective. Your money will go farther across the pond than it ever has.

What's Next for Stocks? The Pros Weigh In There are several reasons why the pound has depreciated to such an extent. However, the biggest reason it has fallen in value is the mini-budget introduced on Sept. 23 by the cabinet of newly appointed British Prime Minister Liz Truss. The Conservative government introduced the most extensive tax cuts in Britain since 1988, when Margaret Thatcher was the prime minister. Cuts include eliminating the top tax rate of 45% – people earning more than $161,327 will now pay the current 40% rate – a year before the government intended for it to disappear.

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Profit and prosper with the best of Kiplinger's expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail. Profit and prosper with the best of Kiplinger's expert advice - straight to your e-mail. Sign up The tax cuts are projected to cost the U.K. Treasury $48 billion in revenue over the next five years. Estimates suggest that approximately half of the tax savings will go to the country's wealthiest 5% of households. Huw Pill, chief economist of the Bank of England, believes the tax cuts will accelerate inflation in the U.K. As a result, interest rates will likely have to go much higher than initially projected.

10 High-Paying Dividend Stocks Yielding 5% or More "In my view, a combination of the fiscal announcements we have seen will act as a stimulus to demand in the economy," Pill said, as reported by The Guardian (opens in new tab). "It is hard not to draw the conclusion that this will require a significant monetary policy response." Moreover, a weak British pound means imported products will be more costly, adding to the inflationary pressures already facing the country. As for U.S. investors, the faltering pound will be good for importers of British goods, such as grocery stores, car dealerships, apparel, etc. However, businesses that generate big sales in the U.K., such as automaker Ford Motor (F (opens in new tab)), beverage giant Coca-Cola (KO (opens in new tab)) and financial services firm Marsh & McLennan (MMC (opens in new tab)), will face greater headwinds trying to grow revenues and profits there.

16 Dividend Kings for Decades of Dividend Growth Morgan Stanley equity strategist Michael Wilson estimates that a 1% increase in the U.S. dollar versus a basket of global currencies results in a 0.5% decline in earnings for the average S&P 500 company. "The recent move in the U.S. dollar creates an untenable situation for risk assets (like stocks) that historically has ended in a financial or economic crisis, or both," Wilson says. "While hard to predict such 'events,' the conditions are in place for one, which would help accelerate the end to this bear market." The British pound has since stabilized after the Bank of England overnight announced an emergency bond-buying program "to restore orderly market conditions." Still, the message to U.S. investors trying to find ways to benefit from the weak currency is clear. The average retail investor should continue to focus on buying quality U.S. stocks with significant domestic revenues and solid overseas businesses. The current market volatility isn't a time to be trying to thread the needle.

Hedge Funds' 21 Top Blue-Chip Stocks to Buy Now Explore More Markets Ford Motor (F) Coca-Cola (KO) Marsh McLennan (MMC) Will AshworthContributing Writer, Kiplinger.comWill has written professionally for investment and finance publications in both the U.S. and Canada since 2004. A native of Toronto, Canada, his sole objective is to help people become better and more informed investors. Fascinated by how companies make money, he's a keen student of business history. Married and now living in Halifax, Nova Scotia, he's also got an interest in equity and debt crowdfunding. Latest Rising Interest Rates Change the Math on Pensions for Some Would-Be Retirees Now is a good time to think about when and if to take a lump sum on your pension and what to do with it. Let's explore the pros and cons. By Michael Aloi, CFP® • Published 9 November 22 Counterattack: Tips for Thwarting a Will Contest From contentious relatives to scam artists, wills are not immune to the threat of a contest. If you have an inkling such a fight could be in your estate's future, here are some ways to limit the risk. By Linda Kotis, Esq. • Published 9 November 22 You might also like Stock Market Today: Huge Crypto Deal Shakes Up Nasdaq News that crypto exchange Binance will buy its rival sent Bitcoin and several tech stocks into a tailspin. By Karee Venema • Published 8 November 22 Stock Market Today: Stocks Rise Ahead of Midterms The Dow outperformed thanks to a major M&A-related boost for drugstore chain Walgreens Boots Alliance. By Karee Venema • Published 7 November 22 Stock Market Today: Stocks Swing Wildly After October Jobs Data The major indexes ended with their first win of the week thanks to the latest jobs report. By Karee Venema • Published 4 November 22 Stock Market Today: Stocks Fall Again as Fed Hangover Persists The major market indexes notched a fourth straight loss as Powell's rate-hike warning kept investor sentiment in check. By Karee Venema • Published 3 November 22 Stock Market Today: Stocks Post-Fed Pop Reverses After Powell Takes the Mic It was a volatile session on Wall Street as investors parsed over the Fed's latest policy statement and Powell's presser. By Karee Venema • Published 2 November 22 Stock Market Today: Stocks Retreat After Strong Job Openings Data The latest jobs data comes as the Fed kicked off its two-day meeting, with another jumbo-sized rate hike expected to be announced tomorrow. By Karee Venema • Published 1 November 22 Stock Market Today: Markets End an Up Month on a Down Note October might have ended with a whimper, but the month overall delivered big-time gains for equity investors. By Dan Burrows • Published 31 October 22 Stock Market Today: Stocks Sizzle on Hopes for a More Dovish Fed The major indexes ended a tumultuous week with a bang thanks to easing inflation data. By Dan Burrows • Published 28 October 22 View More ▸ kiplinger About Us (opens in new tab) Terms and Conditions (opens in new tab) Privacy Policy (opens in new tab) Cookie Policy (opens in new tab) Kiplinger is part of Future plc, an international media group and leading digital publisher. Visit our corporate site.
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