Sterling fell sharply on Friday after the new UK Chancellor, Kwasi Kwarteng, unveiled his ‘mini budget’, as investors expressed concern about the sustainability of the UK’s public finances given the scale of the £45 billion tax cuts announced. Mr Kwarteng doubled down on his tax-cutting stance over the weekend, promising “more to come”, and sterling continued to slide on Monday morning, reaching a new low of $1.0327 before rebounding. Stepping back, not all of sterling’s reported weakness can be pinned on the new UK government: some of it relates to dollar strength. For example, the UK’s currency fell more than 6% against the US dollar in Q3, about the same amount as the euro against the greenback. But since Liz Truss become the new British prime minister on 6 September, sterling has fallen a lot more against the US dollar than the euro has against the greenback.
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