The British pound hit its lowest level since July 1, 2020.
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The beleaguered British pound fell 1.95% against the dollar on Friday, after Britain’s new government announced a sweeping economic plan in a bid to boost growth.
The pound fell to $1.1032 at 12:00 p.m. London time, around an hour after the measures were unveiled in the House of Commons.
The pound has seen a precipitous fall against the greenback this year, reaching levels this month not seen since 1985. Friday’s measures were touted by the government as heralding a new era for the growth-focused UK , and included a mix of tax cuts and investment incentives for businesses.
The Bank of England said on Thursday that Britain’s economy was likely already in recession as it raised interest rates by 50 basis points.
Investors dumped UK bonds amid an expected rise in government debt. Paul Johnson, director of the Institute for Fiscal Studies, said markets appeared “frightened” by the scale of the “tax giveaway”.
Yields on 2-year British government bonds rose by the highest daily amount since 2009 on Friday, Reuters reported, and 10-year yields saw their biggest daily rise since 1998. Yields move in the opposite direction prices.
The euro was also down against the dollar on Friday morning, falling 0.8% on the day to $0.976 after a statement showed the Eurozone Purchasing Managers’ Index fell to 48, 2 in September. S&P Global said this meant the bloc was likely to enter a recession.
The dollar has been boosted this year by volatile equity markets and rising Federal Reserve interest rates.
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