- Posted by currencies in Bank of England, Brexit, Budget, coronavirus, Currency, Dollar, Economy, EUR, Fed, GBP, Inflation, Prime Minister, Sterling, UK, Uncategorised
- October 4, 2022
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Global stocks rallied for a second day, after Britain’s decision to ditch part of a controversial tax-cut plan and slightly paler expectations for aggressive central bank action returned some confidence to investors.
UK Finance Minister Kwasi Kwarteng on Monday announced the government would back down on reversing a tax break for top earners that formed part of a package aimed at boosting growth.
This measure only makes up a small part of the 45 billion pounds in unfunded tax cuts that sent the pound crashing to record lows and wreaked havoc in the gilts market.
But it was enough to soothe some of the recent angst in the market and, together with emergency bond buying from the Bank of England, sterling was set to make up most of the losses incurred since the mini budget was unveiled on Sept. 23.
The pound, meanwhile, rose 0.3% against the dollar to trade at $1.1363, having pared some of the day’s gains. Sterling has risen by more than 10% since the mini-budget.
The rise of the pound is also partly due to the softening of the dollar as the index fell against other major currencies for a fourth consecutive day on Monday and continued to trade at lower levels this morning.
Analysts are still bearish on the outlook as the UK government tries to reassure markets after its mini-budget shattered investor confidence.