Sterling slumped following the announcement of £45bn of tax cuts directed at higher earners amid investor concerns over the large rise in public borrowing that will be needed to fund Kwarteng’s programme. At the time of writing, the pound was worth $1.07 – a fall of almost 10 per cent in one month.
The decline follows a longer-term fall in the pound against the dollar reflecting concerns about the UK economy as well as a stronger US dollar.
Last week’s tax cut announcement also caused the pound to fall against other currencies. On 23 September, sterling lost over 1 per cent against the euro, which itself has been hit by concerns around energy security and recession in Europe, as well as the prospect of a far-right government in Italy following its general election yesterday (26 September).
Among other things, a weaker pound means that UK consumers will face higher prices for imported goods and services including food, as well as oil and gas, which are priced in dollars.