The pound’s value has dropped almost eight per cent against the US dollar in the past month. It has now shed 20 per cent of its value since January - hitting $1.09 on Friday - after the Government’s tax-cutting plans were introduced.
The Daily Telegraph now reports that some backbench Tory MPs are prepared to “hit the nuclear button” if the pound continues to fall.
One Tory MP told the paper: “My biggest anxiety is that I’m going to wake up on Monday and it’s going to be Black Monday.”
Another unnamed source said Kwasi Kwarteng’s budget was “much more expansive than what people were expecting” and they were disconcerted by how markets had been sent into a “tailspin” on Friday.
Watch: Pound falls to all-time low against US dollar amid fears over UK tax cut plans
“This Budget will live or die not on what the electorate think, not on what Opposition politicians think, not even what Conservative politicians think,” they said. “It is the global markets’ response to what looks like very risky behaviour from our Government.”
They added: “The Bank of England is being backed into a corner.
“If you’re already in a recession and you raise interest rates by, say, 100 basis points, which some people have been talking about, it’s like accelerating your car into a brick wall.
“If the pound drops below one dollar, that’s territory for me where I’m afraid I would hit the nuclear button. I just think that would be unconscionable.”
The Bank of England increased the cost of borrowing by half a percentage point to 2.25 per cent last week in an effort to tame rampant inflation, running at just under 10 per cent.
The last time there were so many bets against the pound was when Boris Johnson resigned as leader of the Conservative Party, triggering leadership uncertainty at a difficult time for the economy.