The pound took a plunge this morning after Chancellor Rachel Reeves spooked the markets with a speech laying the groundwork for big tax hikes in her Autumn Budget.
Sterling fell to its lowest since April against the dollar this morning at $1.30 – a 0.46 per cent loss today alone.
The pound was also struggling against the euro, down 0.32 per cent to €1.14.
Neil Wilson, investor strategist at Saxo Markets, said the “market reaction thus far is to sell sterling.”
“It’s the pressure valve and Reeves wouldn’t like to see that kind of reaction coming directly from her speech,” he added.
It followed the Chancellor stating the country faced “big challenges,” even following her historic £40bn in tax hikes in her last Budget.
Reeves said she would make the “right, not popular” decisions, adding she wanted Brits to “understand the circumstances we are facing.”
However, she refused to make any comment on individual policies, even when pressed whether the government would stand by its manifesto commitment to not raise taxes on “working people”.
FTSE 100 takes a tumble
Lale Akoner, global market analyst at eToro, said: “With the pound weaker and the FTSE 100 slipping, investors seem to be positioning for a steady, not spectacular, path ahead.
“Reeves’ balancing act between discipline and demand will likely set the tone for UK assets and for consumer sentiment heading into the budget.”
The FTSE 100 has fallen 1.26 per cent this morning to 9,579.06, which is no small feat for the City’s blue-chip index.
The index has a market cap of near £2.3tn, meaning today’s drop would shed around £25bn in value.
FTSE futures had already pointed to a loss ahead of Reeves’ speech after jitters in the tech sector spurred a sell-off.
Miners have also had a tough morning as gold slipped from its $4,000 mark and pressure clamped down on copper and iron ore prices.
Copper miner Antofagasta topped the fallers this morning at four per cent to 2,634.00p.