The pound has hit an all-time low against the dollar after the bonanza of tax cuts and spending measures in Kwasi Kwarteng’s mini budget threatened to undermine confidence in the UK.

The pound plunged nearly 5% at one point on Monday 26 September to $1.03, its lowest since Britain went decimal in 1971, as belief in the UK’s economic management and assets evaporated. At the time of writing, the pound had rebounded slightly to almost $1.08, but this is still a very low rate historically.

Chris Weston, head of research at the brokerage firm Pepperstone, said the pound was “the whipping boy” of the G10 foreign exchange market, while the UK bond market was “getting smoked” thanks to Kwarteng’s £45bn debt-financed tax-cutting package.

Weston added: “Investors are searching out a response from the Bank of England. They’re saying this is not sustainable, when you’ve got deteriorating growth and a twin deficit. The funding requirement needed to pay for the mini-budget means either we need to see far better growth or higher bond yields to incentive capital inflows.”