It was once unthinkable, but now it is becoming less and less unrealistic, more and more real is the possibility that GBP in parity one to one against him dollar. Constant danger of recession, its heavy addiction British economy foreign capital, a sharp increase in the cost of servicing debt undermines the value of British securities, leaving the currency and bonds of Old Albion in a desperate situation. The pound sterling exchange rate is the oldest in the world currency markets, it is already 250 years old. However, for the first time, markets give a chance on the 7th, which GBP to $1.05 at the end of the year and a good chance to cross the Rubicon of parity one to one.

The reason, of course, is the troubles of the British economy, similar to the troubles of other countries, but combined with their own pathologies. First of all, it is facing rising inflation, which has accelerated since the pandemic-induced recession bailout, and now hits the highest interest rate the country has seen in years. Growth is expected to slow further in the coming months as key economic indicators worsen. Everything shows that soon Britain will start flirting with the recession.

For the country to work, it needs an ocean of foreign capital.

The country’s budget deficit is large, and about 25% of securities, as ten-year British government bonds are called, are in the hands of foreigners. In addition, the UK is facing the same serious problem as other European countries in terms of skyrocketing energy prices, forcing the Treasury to resort to some sort of subsidies. Although the UK is not dependent on Russian gas, it accounts for 35% of the indirect effects of the energy crisis affecting other countries. If the current account deficit is taken into account, the country presents a double deficit, which is one of the largest in the world. It is 11.1% of the UK’s GDP, which means that it needs an ocean of foreign capital to keep the country functioning.

And as if all this wasn’t enough, the British government’s debt is expected to rise to unimaginable heights. For reasons that were understandable when inflation was low and the political situation stable, about 24% of the UK’s debt is due to inflation. In practice, this means that if the worst forecasts are true, the UK will end up paying almost 3% of its GDP annually in interest on its debt alone. Meanwhile, bond markets are starting to worry about who will be the next British prime minister. Lees Truss, who is likely to take over the reins of the country on Sept. 5, plans to overhaul the Bank of England’s interest rate powers, in short, limiting central bank independence. Intervening in the delicate link that has developed over many decades between apparently more transparent central banks and the bond market would be risky even in the best of times. Now, however, growth is heading for a slowdown or even recession, the cost of servicing debt is skyrocketing, and the need for foreign capital is huge. Therefore, the risk of such an intervention will be much higher. The UK may not be aware, but the markets are worried.