Sterling could plunge to parity with dollar – Citi

LONDON (Reuters) – The UK risks a confidence crisis in its currency and sterling could sink to parity with the dollar, Citi said on Friday, after the UK government announced a series of tax cuts financed with tens of billions of pounds more in borrowing.

The pound dropped 2.2% to as low as $1.10 on Friday, a new 37-year low, meaning a move to parity would mark another 10% drop. Sterling’s all time-low is around $1.05.

“We think the UK will find it increasingly difficult to finance this deficit amidst such a deteriorating economic backdrop; something has to give, and that something will eventually be a much lower exchange rate,” Citi analyst Vasileios Gkionakis said in a research note.

(Reporting by Tommy Reggiori Wilkes; Editing by Amanda Cooper)