The embattled British pound fell more than 2% against the dollar Friday, after the new U.K. government announced a radical economic plan in a bid to b

British pound plunges, bonds sink after government announces tax cuts

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2022-09-23 14:30:06

The embattled British pound fell more than 2% against the dollar Friday, after the new U.K. government announced a radical economic plan in a bid to boost growth.

Sterling dipped as low as $1.1029 at 12:20 p.m. London time, a couple of hours after the measures were unveiled in the House of Commons. By 1.50 p.m. it was trading around $1.1070.

The pound has been on a precipitous fall against the greenback this year, hitting levels this month not seen since 1985. Friday's measures were billed by the government as heralding a new era for the U.K. focused on growth, and included a mix of tax cuts and investment incentives for businesses.

Investors also ditched U.K. bonds amid a rise in expected government debt. Paul Johnson, director of the Institute for Fiscal Studies, said markets appeared "spooked" by the scale of the "fiscal giveaway," and said it represented the highest level of tax cuts in half a century.

Yields on 2-year U.K. government bonds hit their highest level since October 2007, and 10-year yields reached the highest level since 2010. Yields move inversely to prices.