What does 'the pound is dropping' mean?
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The value of the pound is currently dropping - but what does it mean?
The value of the pound is currently dropping - which could make our food, fuel, and petrol more expensive.
The pound sterling is the currency we use in the UK to buy and sell things.
When our currency is worth less, it gets more expensive to buy from other countries.
The pound has recently been at a record low, compared to the dollar.
The pound has been losing value against the dollar
What is a currency?
A currency is the type of money used within a country to buy and sell things.
Some currencies you might have heard of are euros, pounds, yen, and dollars.
You might have even been on holiday to a different country, and had to exchange pounds for another currency.
All currencies are worth different amounts - and they're bought and sold all over the world by investors.
How many currencies do you know?
What are investors?
Investors are people, or companies, that put money into something, hoping to get more money out of it.
This happens with money all over the world - investors buy and sell large amounts of different currencies.
They hope that they can then sell these amounts of currency when they're worth more.
The value of a currency can change depending on how many people want to buy it or sell it.
If more people want to buy it - then it's worth more.
What is happening now?
Right now investors are selling off the pound and its value has fallen. Money experts say this is after an announcement of new plans from the government to cut tax.
Tax is a charge adults pay on things they buy and on the money they earn. It helps pay for public services like schools and the NHS.
The less tax people pay, the less money the government has to pay for public services.
Because the government isn't getting that money from people - it has to borrow it - which costs a lot of money.
Investors are concerned about the amount of extra money the government needs to borrow.
Investors buy and sell different currencies to make money
What does this mean?
Investors buying and selling lots of money might feel like it's happening quite far away from home, but it can impact our everyday life.
If the pound is worth less, it costs more to buy things from overseas.
We buy all sorts of things from other countries - including food, fuel, petrol, and technology.
Money experts say if the pound is worth less, prices could rise more.
- Published5 September 2022
