Can anything halt the pound’s fall?

My predecessor Christopher Fildes looked at exchange rates through a cocktail glass: three negronis for the Italian lira equivalent of a tenner, good; a $2 martini for £1, even better. That latter ratio applied briefly 30 years ago when, he wrote, the favoured tipple ‘brushed against my lips like an angel’s kiss’. It recurred during the financial crisis of 2007-08, when no one was really able to enjoy it, and has never been seen since. On Monday, as Liz Truss was crowned, the pound dipped below $1.15, in sight of its 1985 all-time low of $1.05. ‘The prospect of …parity versus the dollar,’ said Bloomberg, ‘is becoming ever less outlandish.’

What cocktail of misfortunes brought us to this? The first problem is that the dollar is so strong. It’s already at par with the euro and has steamrollered the yen. That reflects the Federal Reserve’s muscular approach to anti-inflationary rate rises, America’s relatively secure energy supplies and under-lying economic strengths, and the dollar’s role as a reserve currency.