The pound plunged to a new low in reaction to the government’s mini budget today (23 September).
In a sign international investors are skeptical of the government’s growth strategy the pound fell a cent and now trades just below $1.12.
This is the lowest level since 1985 and the pound has shed 17% against the US dollar this year.
Chancellor Kwasi Kwarteng unveiled a Growth Plan of over 30 measures that aim to tackle high energy bills, drive down inflation and cut taxes to drive growth.
These include the reversal of the National Insurance hike, slashing corporation tax from 25% to 19% and capping energy prices.
Hymans Robertson senior investment research consultant Chris Arcari said: “Sterling has weakened materially this year, most significantly against the dollar, as the economic outlook has deteriorated. Sterling took yet another leg lower upon Liz Truss winning the Conservative leadership contest and the release of early details of her energy support package and deregulation and tax-cutting agenda.
“The gilt and currency markets are likely reflecting concerns around the medium-term growth and inflation outlook as opposed to reflecting an expectation of a higher real growth target being realized.
“Sterling weakness year-to-date has enhanced overseas returns to unhedged sterling-based investors but, while sterling looks cheap relative to measures of fair value, it is difficult to see a near-term catalyst to support a stronger sterling.”