The pound dipped for a second consecutive day against a broadly stronger dollar on Tuesday and hit its lowest in more than six weeks against the euro, with most of the losses coming after the British government set out a plan to raise taxes.
Prime Minister Boris Johnson unveiled plans to raise taxes on workers, employers and some investors to try to fix the health and social care system, angering some in his governing party by breaking an election promise.Johnson outlined what he described as a new health and social care levy, which will see the rate of National Insurance payroll taxes paid by workers and employers rise by 1.25 percentage points. The same increase will be applied to the tax on shareholder dividends.
It fell to its lowest against the euro since July 21, down 0.2% at 86.14 pence, and last traded 0.1% lower at 85.94 pence. Hawkish comments from BoE policymaker Michael Saunders did not have a sizeable impact on the pound. Saunders said the central bank may need to raise interest rates next year if growth continues and inflation becomes stickier."I would assume that the market sees Saunders as an outlier on the MPC , thus feels no need to reprice hawkishly based on what he's said," said Michael Brown, senior market analyst at Caxton FX.
But recent surveys have hardened indications of slowing economic growth. They also reveal that economic momentum is stuttering under the impact of Brexit, global supply chain issues and COVID-19 isolation rules.
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