The last decade has been quite interesting in terms of European politics. Some of the major issues have been the potential breakup of the European Union into Northern and Southern European countries, Greece's default, a blowout in sovereign yields for Portugal, Italy, Ireland, Greece, and Spain (PIIGS), and the recent invasion of Ukraine by Russia which is putting incredible upwards pressure on energy and electricity prices.

Of course, this doesn't include maybe the biggest example which is 'Brexit' when through a referendum England voted to leave the European Union which has brought its own set of complications. It's also resulted in London becoming less influential as a global financial hub.

In fact, the current story of the British pound plunging and even threatening to break parity with the U.S. dollar started with 'Brexit' and the sequence of events it set off. Boris Johnson rode the momentum of Brexit and ascendancy of the Conservative Party to the Prime Ministership.

His tenure ended in a scandal which led to Foreign Secretary Liz Truss being chosen by the Party to become the new PM. In part, she won based on her economic platform which had been dubbed 'Trussonomics'.

Her plan essentially involves lowering taxes, while increasing the deficits. She sees this as the key to re-invigorating a stagnant economy, but it's increasing borrowing at a time of high interest rates. Clearly, investors are wary of holding pounds and assets denominated in pounds, resulting in the pound falling all the way to $1.03 against the U.S. dollar before bouncing to $1.07.

Prior to Brexit, the British Pound would trade above $1.50 vs the U.S. dollar. This will make U.K. exports more competitive and marginally increase tourism to the island. However, it's going to make imports substantially more expensive.

It's also an economic policy that is more appropriate for a period of low inflation and low rates. Inflation is fundamentally about too many dollars (or pounds) chasing too few assets. Adding to the amount of pounds in circulation undermines the goals of the central bank to lower inflation and undermines the currency's strength.