For the first time since 1971, British pound crashes against dollar

For the first time since decimalisation in 1971, the British pound has plunged to its lowest level against the US dollar.

This comes after United Kingdom Chancellor, Kwasi Kwarteng disclosed historic tax cuts funded by huge rises in borrowing.

Also, the pound has been under pressure as the dollar has been strengthened by the US central bank continuing to raise interest rates.

According to Peter Escho, the co-founder of investment firm Wealthi said: “All currencies are getting sold off against the US dollar, so there is a large element of US dollar strength. But with the pound, it has really been exacerbated by news that the new government will be cutting taxes, which is inflationary.

“Add to that recent energy subsidies and news that the Bank of England might need to have an emergency rate-hike meeting, this all results in a sense of panic,” he added.

BBC reports that some investors think the Bank of England will be compelled to take emergency action to halt the pound’s slide.

“To stop the bleeding even temporarily, the BOE may well enter ‘whatever it takes’ territory to bring inflation down. An emergency meeting rate hike could happen as soon as this week to regain credibility in the market. We could even see a hike today,” Stephen Innes, managing partner at SPI Asset Management told the BBC.

The current decline of the pound would influence imports of commodities priced in dollars, including oil and gas, which will be more expensive.

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