Following Chancellor Kwasi Kwarteng’s mini-budget announcement on Friday, September 23, sterling fell close to $1.03 in early Asia trade before regaining some ground to stand at about $1.07 this morning, UK time. This is the lowest the pound has dropped against the dollar since decimalisation in 1971.
The drop in the pound comes following Mr Kwarteng’s promise of even more tax cuts on top of the £45billion package he announced on Friday, September 24.
There are also concerns that inflation will remain high and force the Bank of England to raise interest rates even further.
A low pound impacts imports of commodities priced in dollars, such as oil and gas. These will now cost more if the pound stays at this low level.
The news will also effect Britons’ plans to go abroad as tourists will find their holiday money won’t go as far as it did before. Europeans will also impacted as the euro touched a fresh 20-year-low against the dollar this morning.
READ MORE: Meghan Markle’s cheap Europe city break is ‘worth every moment’
Britons have taken to social media to share the changes they will now have to make to their holiday plans.
Some have posted on Twitter this morning, saying how they will no longer be able to travel to the US.
Christos Fellas wrote: “I miss holidays to America.” User @stockymendoza said: “No holidays to America for a while then.”
Kim shared a meme of a cartoon animal hitting its head against the wall, with the caption: “So I’m heading off on my big holiday to America in about three weeks. Probably time to go get my dollars exchanged…Oh.”
User @unders007 wrote: “I wish I hadn’t booked my holiday to America now. Don’t start me on Truss. When Kier Starmer looks like the better option, you know the country is in trouble.”
Greg Foster commented: “Boy, I really picked the right time for my first big post-pandemic holiday to America.”
User Rab joked: “Phew…no more trying to convert $ to £, in my head, to work out how much stuff costs while on holiday in America. Cheers Kwasi!”
READ MORE: ‘Go back!’ Norway rage as cruise passengers told ‘not welcome’
Phil Mordecai said: “As it stands it’s probably cheaper to holiday on the moon than it would be in America.”
Pat Sissons commented: “As I’ve clearly picked the worst financial time in modern history for a holiday to America, now wondering if I can make enough sandwiches to put in my hand luggage to get me through the week!”
Katherine Miller, who is currently on holiday in the US, shared: “Just paid £31 for two bacon rolls and two coffees. Thank you!”
Abby Hambleton added: “Good job I’m going on holiday to America in less than two weeks eh.”
A low pound comes after Mr Kwarteng said over the weekend that there was “more to come” in terms of tax cuts. The Chancelleor had already announced a massive shake-up of taxes on Friday during a “mini-budget” to boost economic growth.
Under the plans, which he hailed a “new era” for the economy, income tax and the stamp duty on home purchases will be cut and planned rises in corporation taxes have been scrapped.
As well as outlining £45billion in tax cuts, the Government confirmed it would spend £60billion for the first six months of its scheme to subsidise rising energy bills for households and businesses. But that cost is expected to rise as the scheme to support households will last for two years.
Shadow chancellor Rachel Reeves described the fall in sterling as “incredibly concerning”.
“We need to hear from the chancellor his plans to get a grip on the public finances because that is what is giving real concern to market traders…and working people,” she said.