Investors jumped to U.S. markets after the pound slumped, with analysts anticipating the pound could plunge further to parity with the dollar in coming months
The British pound plummeted to a new record low against the U.S. dollar on Monday, after the U.K. government announced the most significant tax cuts in 50 years while boosting spending at the same time.
The pound has been under pressure due to the strength of the dollar after it plunged nearly 5 percent to $1.035, its lowest since 1971.
The slide followed as trading opened in Asia and Australia, extending the already 2.6 percent dive from Friday, before regaining some ground to stand at around $1.07.
The euro dropped to a 20-year-low against the dollar amid investor concerns about the risk of recession this winter with no sign of an end to rising energy costs or the war in Ukraine.
The dramatic decline, sparked by the British Chancellor of the Exchequer Kwasi Kwarteng’s promise for further tax cuts on top of a £45 billion ($47 billion) package, has raised concerns that the pound could plunge to parity with the US dollar in the coming months.
On Friday afternoon, Bloomberg’s options pricing model showed there was a 26 percent chance of the pound and the dollar hitting parity within the next six months, up from a 14 percent chance on Thursday.
