Sterling Slumps to Record Low; Kwarteng Points to More Tax Cuts

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Sterling Slumps to Record Low; Kwarteng Points to More Tax Cuts
Credit: © Reuters.

By Peter Nurse - The British pound continued to slump in early European trading Monday, falling to a record low against the soaring U.S. dollar as traders doubted the sustainability of the new U.K. government's economic plan.

GBP/USD slumped as much as 5% to an all-time low of 1.0327 earlier Monday, before stabilizing around 1.0611, 2.3% below the previous session's close.

This weakness followed hefty selling on Friday after new U.K. finance minister Kwasi Kwarteng unveiled the country’s biggest package of tax cuts in 50 years, which would likely have to be funded by the biggest increase in borrowing since 1972 even with the country facing slowing growth and twin deficits.

Kwarteng added in an interview on Sunday that he wants to keep cutting taxes as part of an effort to boost U.K. economic growth, telling the BBC there was "more to come".

Sterling’s weakness helped the safe-haven U.S. dollar climb to a new two-decade peak against a basket of major peers. 

At 02:35 ET (06:35 GMT), the US Dollar Index , which tracks the greenback against a basket of six other currencies, gained 0.5% to 113.493.

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