Pound to keep falling whatever the result of UK leadership race

Regardless of who wins the race to replace Liz Truss as British Prime Minister, one thing is clear: the pound will keep on falling.

Market participants forecast a further decline of sterling as economic factors and the Bank of England's political stance have a negative impact on the currency. Three-month risk reversals for the pound, as an indicator of the expected direction of its movement during this period of time, remain strongly negative.

The weakening pound is a serious problem for the UK, as rising borrowing costs, huge energy bills and high taxes cloud the future prospects of the economy in the country. As consumer confidence approached historic lows in October, there are signs that the pound could continue its decline, which has reached 17% this year.

The Bank of England's stance on monetary policy could be an even bigger obstacle for the pound to stabilize, after deputy governor Ben Broadbent expressed his doubts Thursday about the need to raise UK interest rates to the extent that investors expect them to.