The pound has recovered from a recent record dip after the chancellor’s mini-budget announcement. But it is still at low levels versus many other currencies.
The recent decline can be mostly attributed to the tax cuts announced during Chancellor Kwasi Kwarteng’s recent mini-budget. The £45 billion package caused concern among investors by considerably increasing future government debt, although Kwarteng has since announced a U-turn on the £2 billion plans to abolish cuts for the highest earners. More generally, escalating inflation expectations from this increased fiscal expansion, coupled with ongoing rising energy costs, have had a negative impact on the UK economy and therefore the value of sterling.
