The Pound plummeted to an all-time low on Monday as markets respond to the UK’s biggest tax cuts in half a century.

In early trade on Asian markets, Sterling declined close to $1.03, before later paring losses to reach $1.06 at the time of writing.

Chancellor Kwasi Kwarteng has promised further tax cuts, on top of the £45 billion package unveiled on Friday, amid forecasts of a surge in borrowing, BBC reports. The Pound has also faced pressure from the Dollar’s strength.

In addition, the Euro hit a two-decade low against the greenback as investor concerns mounted over the risk of recession, with no indication of the energy crisis or war in Ukraine coming to an end.

The Pound also declined 1.3% against the single currency, after plummeting to its lowest since September 2020 at 92.60 pence.

According to Kit Juckes, Societe Generale’s head of currency strategy in London, markets tended to overshoot but signalled two factors on Sterling's decline:

"One is the loss of confidence in UK fiscal policy and that won't help Sterling," he said. "The second is that the mini budget has allowed Sterling to be the short of choice against the Dollar."

The Dollar index – measuring the currency against a basket of major peers – hit 114.58 for the first time since May 2002, Reuters reports, before easing to 113.16.

"The Dollar strength was in large part because of the heavy selling of the Sterling," said Saktiandi Supaat, regional head of FX research and strategy at Maybank.

"It's more of a risk-off sort of thing. Global recession fears have actually intensified and widened quite broadly."

Moreover, the Australian Dollar fell to $0.64845, albeit briefly, a May 2020 low, whilst the Canadian Dollar slumped to a new trough of C$1.3638 per Dollar, not seen since July 2020.