LONDON (Reuters) - Sterling volatility surged on Monday to its highest since the fallout from the Brexit referendum in mid-2016, after the British government's fiscal plan alarmed investors and sent the pound to a record low against the dollar.
Finance minister Kwasi Kwarteng, who unveiled a "mini-budget" on Friday full of tax cuts and very few details on how the government would fund them, doubled down at the weekend on his pledge to cut taxes and shrugged off the impact of short-term market reactions.
Three-month implied options volatility for sterling hit an intraday high of 19.785% on Monday, the highest since the result of the Brexit vote in late June 2016, when it topped 22%, according to Refinitiv data.
The pound fell against the dollar by as much as 5% earlier in the day to a trough of $1.0372, the lowest since decimalisation in the early 1970s. It later recovered and was last flat against the U.S. currency at around $1.0851, in one of its most volatile trading days in years.