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British Pound Hits Record Low Against Dollar After U.K. Signals More Tax Cuts

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British Pound Hits Record Low Against Dollar After U.K. Signals More Tax Cuts

(CTN News) – In reaction to the UK’s biggest tax cuts in 50 years, the pound has fallen to a record low against the dollar.

On Monday morning, UK time, sterling fell close to $1.03 before recovering some ground to stand at about $1.07.

On top of a £45bn package announced on Friday, Kwasi Kwarteng promised more tax cuts.

Government borrowing costs continued to Erise on Monday as well.

Oil and gas will cost more to import if the pound stays at this low level against the dollar.

In addition, American goods could also be significantly more expensive, and British tourists will find that their holiday money won’t stretch as far as it did before the sterling’s slide.

Tax cuts and borrowing billions by the government threaten to stoke inflation and force the Bank of England to raise interest rates even further.

Millions of homeowners would see their monthly mortgage costs rise as a result of this.

Why the falling pound matters

Every day, investors trade huge amounts of foreign currency. Exchange rates at banks, post offices, and foreign exchanges are also determined by the rate at which investors swap currencies.

Most people don’t think about exchange rates until they need to exchange money for a foreign vacation. Traveling abroad will be more expensive if the pound is worth less than the local currency.

A fall in the pound affects household finances as well.

A weaker pound increases the cost of importing goods from overseas.

Petrol, for instance, is priced in dollars, so a weak pound can make it more expensive to fill up your car. Dollars are also used to price gas.

iPhones, for example, made overseas, may be more expensive in UK stores. Buying parts from abroad can even increase the cost of things that are made in the UK.

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