Kwasi Kwarteng is contending with massive market turmoil sparked by his tax-cutting mini-budget as a disastrous day for the pound saw Labour take its biggest poll lead over Tories for more than 20 years.
The pound steadied in early trading in Asian markets on Tuesday as it recovered ground slightly from the record low of 1.0327 against the US dollar it struck early on Monday morning after traders were spooked by the Government’s economic plans.
Sterling sat around around 1.08 dollars by 7am on Tuesday, but economists have warned it could still fall to parity with the dollar this year for the first time.
Former US Treasury Secretary Larry Summers has predicted that the magnitude of Britain’s trade current account deficit could push sterling below parity with both the dollar and euro.
He said: “Financial crisis in Britain will affect London’s viability as a global financial center so there is the risk of a vicious cycle where volatility hurts the fundamentals, which in turn raises volatility.
“A currency crisis in a reserve currency could well have global consequences.”