The pound and London stock market plunged in what one analyst called “the worst day I have ever seen” after the Chancellor on Friday revealed his mini-budget.
Sterling repeatedly fell to new 37-year lows against the dollar during the day, slowly edging towards its all-time trough.
At its lowest point on Friday afternoon £1 could buy just 1.0896 dollars – the worst exchange rate for Britons since 1985.
It was a drop of over 3 per cent, and means the pound has lost more than 7 per cent of its value against the dollar in just a month.
Normally a falling pound is good for the FTSE 100 – it makes it cheaper for people outside the UK to buy British-made products.
But Friday was not a normal day.
London’s top index fell below the 7,000-point mark for the first time since mid-June during Friday’s trading.
At its trough, the index was trading down 2.5 per cent at 6,981.5 points, its lowest since March when the market had plummeted after a nuclear power plant caught fire in Ukraine.
“The is the worst day I’ve ever seen in the markets from a British perspective,” said Neil Wilson, an analyst at Markets.com.
By the end of the day, the FTSE had closed at 7,018.6, down 140.92 points or 2 per cent.
The FTSE 250 and FTSE All Share indexes also both closed down 2 per cent.
“By throwing Rishi Sunak’s tax raising plans on a bonfire, the Government is taking a big gamble that growth will be ignited, to help the economy grow,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.
“But confidence that these unfunded tax cuts are a coherent policy for today’s inflation laden times is going up in smoke, with the pound sliding to fresh 37-year lows against the dollar at 1.10 and Government borrowing costs escalating.
“The yield on 10-year gilts rocketed to hit 3.7%, surging from 3.2 per cent on Tuesday as investors demanded more return for the greater risk they were taking by buying Government debt.”
According to reports in the Times, Truss-supporting hedge fund managers made a small fortune by betting against the British economy ahead of the chancellor’s statement.
Tweeting the news, Paul Mason described it as “how Conservatism really works”.
Related: Rachel Reeves thanks chancellor for ‘comprehensively demolishing’ his party’s record
