Holidays, spending and benefits? What the pound hitting a record low means for Britons

The pound plunged to a record low against the US dollar early this morning (Monday September 26) after a raft of tax cuts announced by the Chancellor and higher interest rates knocked international confidence in the currency.

It fell by more than 4% to just 1.0327 dollars in early Asian trading, having already tumbled on Friday in the aftermath of Kwasi Kwarteng’s mini-budget. It adds to a months-long fall in the value of the pound.

However, the euro also hit a fresh 20-year low, amid recession and energy security fears. It comes as Mr Kwarteng has been forced to defend his plans in recent days, while suggesting more tax cuts are on the horizon.

Read more:Pound hits all-time low as fallout from Kwasi Kwarteng's 'mini-budget' continues

The Chancellor has previously brushed off questions about the markets’ reaction to his mini-budget – which outlined the biggest programme of tax cuts for 50 years – after it was announced on Friday using more than £70 billion of increased borrowing. On Sunday (September 25), he claimed the cuts 'favour people right across the income scale' amid accusations they mainly help the rich.

Here is a look at why the pound has fallen and what it means for UK households...

The value of the pound has fallen as international currency traders have been selling off sterling in favour of the traditionally more robust US dollar. Typically traders often buy into the dollar, due to its strength, during times of economic strife, which is why other currencies such as the euro and Japanese yen are also at their lowest against the dollar in decades.

Nevertheless, this week’s particular slump in the value of the pound has also been heavily impacted by political and economic decisions. The Chancellor’s mammoth