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Probability of Pound Sliding to Parity This Year Jumps to 60%

  • Fears UK tax package will fan inflation weighing on sterling
  • Pound under pressure after more UK tax cuts signaled
Bloomberg business news
WATCH: The pound plunged to a record low after Chancellor of the Exchequer Kwasi Kwarteng vowed to press on with more tax cuts. Lizzy Burden reports.Source: Bloomberg

It is looking more and more likely sterling will fall to parity against the dollar this year based on option market pricing. 

Sterling-dollar implied volatility suggests there is a 60% probability spot will hit 1.00 before the end of this year -- based on spot trading at 1.0552 -- compared to 32% on Friday. The currency pair plunged to a record low of 1.0350 Monday in Asian trading after Kwasi Kwarteng, the new Chancellor of the Exchequer signaled more tax cuts might be in the pipeline.