British pound plunges to all-time low against USD

The British pound has plunged to its lowest level against the US dollar since decimalisation in 1971, the media reported on Monday.

During early Asia trade on Monday morning, the pound fell by more than 4 per cent to $1.0327 before regaining some ground to around $1.05, said the BBC report.

Monday’s slump came just two days after the British currency fell to a fresh 37-year low against the US dollar as investors worried that large-scale tax cuts announced by the government would bring much fiscal uncertainty.

On September 23, the pound tumbled more than 3 per cent and traded below $1.10 — its lowest level since 1985, Xinhua news agency reported.

The record lows came in the backdrop of Chancellor Kwasi Kwarteng’s unveiling of his ambitious plan of historic tax cuts and boost economic growth.

The new measures include cancelling the planned rise in corporation tax to 25 per cent, keeping it at 19 per cent, and reversing this April’s 1.25 percentage point rise in National Insurance contributions.

Kwarteng on September 23 also announced a 1 per cent cut to the basic rate of income tax to 19 per cent in April 2023, a year earlier than planned.

The 45 per cent additional rate of income tax on earnings above 150,000 pounds will be scrapped.

Meanwhile, the UK’s consumer price index (CPI) rose by 9.9 per cent in the 12 months to August.

To tackle high inflation, the Bank of England (BoE) on Thursday increased interest rates by 0.5 percentage points to 2.25 per cent, the highest since 2008.

Elevated inflation, the ongoing energy crisis in Europe and the strengthening US dollar have continued to put pressure on the British pound.

Also on Monday, the euro touched a fresh 20-year-low against the dollar in morning Asia trade amid investor concerns about the risk of recession as winter approaches with no sign of an end to the energy crisis or the war in Ukraine.

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