British pound slumps despite Bank of England intervention in bond market

The British pound on Wednesday continued to plummet against the dollar, falling 1.6% to $1.0538 despite Bank of England intervention in the bond market amid market turmoil.

The British pound on Monday hit an all-time low against the U.S. dollar, falling as much as 4.7% to $1.035 after Chancellor of the Exchequer Kwasi Kwarteng vowed more tax cuts.

Last week, the new government led by Prime Minister Liz Truss announced a plan to bolster growth, including through tax cuts and the cancellation of a planned corporate tax rate hike to 25%. In total, it is estimated that the plan will cost £45 billion (over $48.2 billion) through 2026-27.

In a cautionary statement on the government's newly unveiled mini-budget, global rating agency Moody's warned the large and unfunded tax cuts in it could lead to higher deficits amid rising borrowing costs and a weaker growth outlook.

The International Monetary Fund also warned the UK about the new mini-budget, saying the nature of current fiscal measures will "likely increase inequality."

Over the last four weeks, the GBP/USD level has dropped 9.59%.

Analysts said the recent falls in the currency reflected not just the broad strength in the dollar, but worries over the UK economy.