Topline
The British pound slumped to an all-time low against the U.S. dollar early Monday morning as markets reacted negatively to the new government’s signals that it will pursue more aggressive tax cuts while it also attempts to subsidize spiraling energy costs for households and businesses.
The British pound briefly fell to an all time low of $1.035 against the U.S. dollar on Monday … [+]
Key Facts
The pound dropped slightly below $1.035—the lowest it has been since the British currency switched to decimal units in 1971—as Asian markets opened on Monday morning.
The currency has since recovered slightly and was trading just above $1.067 at 8 am BST, according to foreign exchange tracker XE.
The British currency also slumped more than 3.7% against the Euro, dropping below €1.08 before recovering to €1.10.
According to Bloomberg, there is now a 26% chance of the volatile pound hitting parity with the U.S. dollar in the next six months.
After hitting a 20-year-high last month, the U.S. dollar has also continued to gain strength with the Dollar Index—which measures the U.S. currency against six other major currencies—rising by 4.64% in the last 30 days to 113.75 points.
Crucial Quote
The U.K.’s Chancellor of the Treasury Kwasi Kwarteng told BBC on Sunday: “There’s more [tax cuts]
to come…I want to see over the next year, people retain more of their income because I believe it’s the British people that are going to drive this economy.” Kwarteng also pushed back against critics who point out his tax cuts disproportionately favor the rich saying, “they favor people right across the income scale.
Source: https://www.forbes.com/sites/siladityaray/2022/09/26/british-pound-plummets-to-record-low-against-us-dollar-after-uk-govt-signals-more-tax-cuts/