UK Markets closed
  • FTSE 100

    7,500.89
    +34.98 (+0.47%)
     
  • FTSE 250

    20,338.96
    +93.53 (+0.46%)
     
  • AIM

    933.20
    +4.84 (+0.52%)
     
  • GBP/EUR

    1.1825
    +0.0007 (+0.06%)
     
  • GBP/USD

    1.2142
    -0.0060 (-0.49%)
     
  • BTC-GBP

    19,904.49
    -133.55 (-0.67%)
     
  • CMC Crypto 200

    575.02
    +3.74 (+0.65%)
     
  • S&P 500

    4,265.07
    +57.80 (+1.37%)
     
  • DOW

    33,673.09
    +336.42 (+1.01%)
     
  • CRUDE OIL

    92.02
    -2.32 (-2.46%)
     
  • GOLD FUTURES

    1,817.60
    +10.40 (+0.58%)
     
  • NIKKEI 225

    28,546.98
    +727.65 (+2.62%)
     
  • HANG SENG

    20,175.62
    +93.19 (+0.46%)
     
  • DAX

    13,795.85
    +101.34 (+0.74%)
     
  • CAC 40

    6,553.86
    +9.19 (+0.14%)
     

Spring Statement: Pound falls after Rishi Sunak's tax cut announcement

  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
·2-min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
The pound
The pound fell after Rishi Sunak's Spring Statement after holding a three-week high earlier on in the day. Photo: Matt Cardy/Getty Images

The British pound has dropped against the safe haven of the dollar after UK chancellor Rishi Sunak announced the first cut to the basic rate of income in 16 years, from 20% to 19% by 2024 in his Spring Statement.

The chancellor announced a cut to fuel duty to combat soaring prices at petrol pumps after Russia’s invasion of Ukraine sent costs even higher.

He revealed a temporary 5p per litre reduction until March 2023, the biggest rate cut on record. The move comes into effect at 6pm on Wednesday.

Read more: Pound falls after Rishi Sunak's tax cut announcement

Sterling (GBPUSD=X) fell 0.6% against the dollar to $1.3186 as the chancellor announced his Spring Statement. It was also down 0.1% against the euro (GBPEUR=X) at 83.3p.

The currency held at a three-week high earlier on Wednesday prior to the Spring Statement and as Britain's latest economy gauge showed UK inflation soared to a 30-year high in February.

Sterling fell 0.6% against the US dollar to $1.3186 after Rishi Sunak announced his tax plan in the Spring Statement. Chart: Yahoo Finance
Sterling fell 0.6% against the US dollar to $1.3186 after Rishi Sunak announced his tax plan in the Spring Statement. Chart: Yahoo Finance

It comes as new data from the Office for National Statistics revealed that UK consumer prices rose 6.2% in the year to February, ahead of forecasts of 6% and up from 5.5% the month prior. This was the highest inflation reading since March 1992, with monthly CPI increasing by 0.8% — the biggest monthly CPI surge between January and February since the financial crash.

Read more: Spring Statement Top takeaways from Rishi Sunak's speech

Rising energy bills, fuel costs and food prices were the biggest drivers of the inflation surge, while transport saw the highest rate for the second consecutive month. Meanwhile, the retail price index hit its highest level in 31 years, hitting 8.2% in February.

Sunak's new package of measure have done little to boost sentiment among investors, who are focused on surging inflation and the Bank of England's approach to interest rates following the hotter than expected figures.

The chancellor also announced a £6bn plan to lift the National Insurance threshold by £3,000. This means it will be equivalent to the income tax threshold, amounting to a tax cut for people of £330 a year.

“It is the single biggest tax cut for a decade,” he said. Some 70% of workers will have their taxes cut by more than they pay for the new levy.

He went on to cut the basic rate of income tax by 1p in the pound in 2024.

Watch: How does inflation affect interest rates?

Our goal is to create a safe and engaging place for users to connect over interests and passions. In order to improve our community experience, we are temporarily suspending article commenting