The British pound continued to slide against the US dollar this week, hitting a new record low against the greenback on Monday. The pound touched $1.0382 in Asian trade – its lowest on record since 1971 – as investors weighed the cost of British Prime Minister Liz Truss’ sweeping tax cuts and investment incentives will be financed by further government borrowing. “The drop in the pound since last week should not be misunderstood as a mere consequence of dollar strength. It is the result of an extremely risky budget by the new prime minister and a Bank of England. quite shy so far only grudgingly raising rates despite everything. The pressures are clear,” British economist Jim O’Neill told CNBC on Monday. The former chairman of Goldman Sachs Asset Management and the former UK finance minister said the Bank of England would have to raise interest rates “more aggressively”, and the government would likely need to “retreat some of its fiscal ambitions”. own” against the British pound. To recover. Sterling’s unrelenting slide this year reflects a difficult macro environment in the UK, which is grappling with its worst cost of living crisis in decades and a series of rate hikes. futile so far still unable to curb inflation. Equivalent to US dollars? Many market watchers believe there could be more pain ahead for the pound. Abhilash Narayan, senior investment strategist at Standard Chartered, told CNBC Pro: “The pound is likely to remain vulnerable in the near-term and a test of dollar parity cannot be ruled out. . Goldman Sachs Europe strategist Sharon Bell said the bank expected the pound to trade at around $1.05 over the next three months. Alvin Tan, head of forex trading at RBC Capital Markets, has a year-end target of $1.04 on the pound and said there is “growing risk” of the coin hitting par equals in early 2023. Meanwhile, Morgan Stanley strategist Graham Secker is even more bearish; he sees the pound hitting $1.02 at the end of the year. Winner Secker was over-proportioned with the blue-chip FTSE 100, which he believes is “supposedly the ultimate ‘weak FX’ play.” 26 note, Secker noted that 40% of the index’s capitalization is derived from stocks that report revenue in US dollars. These stocks contribute nearly 60 percent of index earnings, he added. Goldman’s Bell also likes the FTSE 100 “international exposure” – which includes “a lot of commodities, global consumers and healthcare companies making money outside the UK” “Normally, when the pound sterling down, FTSE 100 up,” she told CNBC Pro. “It’s usually negatively correlated between the two.” Read more Last week’s global best performers include an energy stock analyst who says a 15% rise is possible Asset manager says a FAANG stock looks ‘very attractive’ over the medium term From Fed to Europe’s currency crisis, here’s what’s behind this sell-off in financial markets James Morton, founder and chief investment officer at Santa Lucia Asset Management, believes UK companies in the natural resources sector will be particular beneficiaries of the weaker pound. “Most natural resource companies have the majority of their revenue denominated in US dollars, while their cost structures can be denominated in a weaker currency against the dollar. This not limited to the natural resources sector, but a large part of the UK Stock Exchange,” he said. Meanwhile, Standard Chartered’s Narayan said he remains overweight on UK shares. UK. “Financial stimulus should be a positive factor for growth while sterling weakness should support corporate earnings… Additionally, the UK will benefit from continued relatively high exposure to defensive, value-driven sectors such as energy and financials, as well as the high dividend yields on offer,” he said. Losers While market watchers remain largely indifferent. With a weak rating for large-cap companies, Goldman’s Bell believes its small- and mid-cap counterparts have the potential to lower prices. The losers in the UK are small and mid-cap companies that are importing raw materials, which have now become more expensive. Retailers are a prime example. Some domestic banks are also sensitive to sterling weakness. FTSE 250, Bell said: Morgan Stanley’s Secker also advises against looking at more UK domestic investments such as the FTSE 250, which “tend to underperform when the pound falls”.