Sterling still vulnerable.

Sterling looks «vulnerable» to further falls, and the looming recession could have «serious» effects on British society, according to the hedge fund firm of billionaire trader Chris Rokos. Rokos Capital Management, which manages about $14.5bn in assets, told its investors that the UK had suffered a bigger shock to its terms of trade than other developed countries because of the impact of Brexit, deglobalisation and the coronavirus pandemic. Such a deterioration, which puts pressure on an already yawning current account deficit and can fuel inflation, made it harder for policymakers to control consumer price growth, the firm wrote in a letter by the Financial Times. «The recession that is required to tame inflation in the UK is deeper than that needed elsewhere, with potentially serious societal implications,» it said.

Rokos declined to comment further. Rokos, one of the world’s most considerable macro hedge funds, profited during the UK’s gilt market crisis in September, thanks to bets that UK borrowing costs would have to rise. That, Rokos wrote, could mean the Bank of England raises interest rates «too slowly to contain inflation». Rokos’s warning comes after highly bearish predictions from several other big-name managers.

Rokos, a co-founder of hedge fund firm Brevan Howard, has gained about 44 per cent in his fund so far this year. His gains this year came during a fruitful period for macro hedge funds, many of which have been able to profit from a massive rise in government bond yields globally as central banks raise interest rates to combat high inflation. However, Rokos said that to be more optimistic about the UK’s outlook, it would have to see «signs of a quietly engineered softer Brexit» or higher immigration.

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