Sterling collapsed to an all time low this morning as investor confidence evaporated in the wake of the government’s plans to slash taxes and ramp up borrowing in a ‘mini-budget’ last week.
The pound plunged nearly five per cent at a time to $1.0327 after trading opened in Asian markets, breaking 1985 record lows. It has since limped back to $1.06 as of 7.07am but is trading down around 5.8 per cent since Friday.
Analysts have speculated that the Bank of England may be forced to step in with emergency measures to steady the price of Sterling.
“The BOE are going to have to step in today, surely, at which point everyone’s going to end up with massively higher mortgage rates to try and stabilise sterling,” Rabobank strategist Michael Every told Reuters.
The collapse sent the dollar higher as it hit a new 20-year top of $0.9528 per euro.
Markets have been shaken after Chancellor Kwasi Kwarteng and Liz Truss revealed plans for around $45bn tax cuts in a mini budget last week, which included scrapping the top rate of tax for the highest earners.
The plans are expected to require an extra £72bn of government borrowing over the next six months alone.
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