British pound plunges to record low after Truss government mini-budget
- Pound’s slide picked up pace last week after the UK’s new government outlined plans to cut taxes, boost spending
- Tax-cut plan has sparked concerns that increased public borrowing will worsen the nation’s cost of living crisis
The British pound tumbled nearly 5 per cent to an all-time low on Monday as investors ran for the exits after the new government’s financial plan threatened to stretch Britain’s finances to their limits.
The currency dived as much as 4.85 per cent to an unprecedented US$1.0327, extending a 3.61 per cent dive from Friday, when finance minister Kwasi Kwarteng unleashed historic tax cuts, and the biggest increase in borrowing since 1972 to pay for them.
Economists and investors said Prime Minister Liz Truss’s government, in power for less than three weeks, was losing financial credibility in unveiling such a plan just a day after the Bank of England hiked interest rates to contain surging inflation.
Sterling was last down 2.7 per cent at US$1.0560.
Marc Chandler, chief market strategist at Bannockburn Global Forex, called the currency’s record plunge “incredible”.
“The weekend press tarred and feathered sterling with assertions of its emerging-market status,” he said.