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Pound plunges to $1.10 against dollar as Kwasi Kwarteng announces ‘growth plan’ - YAHOO FINANCE
The pound (GBPUSD=X) dropped to a fresh 37-year-low against the dollar on Friday as UK chancellor Kwasi Kwarteng unveiled the government's "growth plan" for the UK economy.
Sterling declined by 1.3% to $1.108 against the greenback, meaning it has shed 17% against the US currency so far this year.
It comes after Bank of England delivered another 0.5% interest rate hike to 2.25% on Thursday and warned the UK could already be in a recession.
Kwarteng announced tens of billions of pounds of increased spending and tax cuts in the mini-budget on Friday.
The tax cuts, which will reduce government income, come as Britain is expected to spend heavily to subsidise energy bills for households and businesses.
The chancellor said the energy support scheme would cost £60bn in its first six months.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: "Confidence in the UK economy has faded away further with sterling falling below $1.12.
"The Truss administration wants to put a rocket under growth, but there is a risk that after a first boost, the policies could crash and burn, particularly if government borrowing costs soar further.
"There are signs that buyers of UK government bonds are becoming even more nervous about the government’s ‘splash the cash’ policies, given the mounting debt pile.
"With inflation set to head above 10%, the Bank of England has warned it will be more aggressive if necessary if the measures brought in by the Truss government inflame hot prices further."
