Pound crashes to record low against the dollar as UK tax cut plans rattle investors

The pound fell to a record low against the dollar after the finance minister promised more tax cuts.

When the UK switched to a decimal-based currency system in 1971, sterling fell to its lowest level in more than four decades. At last check, it was down 1.51%.

According to analysts, the Bank of England may have to raise its interest rates in order to prop up the pound. The UK's central bank raised interest rates on Thursday but won't meet again until November 3.

The British currency has fallen since the UK's new prime minister revealed the government's growth plan. The economists said the tax cuts were fiscally irresponsible because the UK is in a cost-of- living crisis.

The pound recovered some of the decline, but is still 3% weaker compared to Friday and 8% weaker over the past week.

SEB's chief quantitative strategist said that there was a chance that the BOE would have to hike by as much as 1 percentage point.

The chancellor in the new government doubled down on the tax cut plans in a Sunday interview.

The planned tax cuts are the most aggressive in nearly 50 years, as they scrap the top rate of income tax.

Simpson said that the plan has been seen as a tax cut for the rich.

The question now is whether we see a follow-through in the European and US session and hurtle towards parity, a level which seemed an impossibility just a few months ago.

The pound will be trading beneath it if we see another day like today.

Even though the BoE raised interest rates by 50 basis points on Thursday, analysts said the crash in the pound could force the BoE to act.

Liz Truss is the new prime minister of the United Kingdom.