Pound Jumps 1% Against Dollar On Uk Govt Action

Posted by Samson Kankan Business News, Europe, Latest Headlines Monday, October 17th, 2022

(AFRICAN EXAMINER) – The pound jumped more than one percent against the dollar Monday as Britain’s fourth finance minister in as many months prepared to update on UK tax and spending plans that spooked markets in recent weeks.

Sterling rallied 1.1 percent to $1.1293 ahead of Jeremy Hunt’s fiscal announcement due 1000 GMT.

Hunt became chancellor of the exchequer Friday after Prime Minister Liz Truss sacked Kwasi Kwarteng as she battled to save her political career just weeks after taking the keys to Downing Street.

Hunt is tipped to tear up Truss and Kwarteng’s plan of avoiding spending cuts to pay for tax cuts, most of which have been scrapped following market turmoil.

The pound recovered strongly having sunk Friday owing to the uncertainty in Westminster, while a news conference by Truss did very little to reassure nervous investors.

UK government bonds yields also slid on the first trading day since the Bank of England ended support put in place in response to turmoil caused by Kwarteng’s mini-budget.

Yields had soared following the budget, prompting the BoE to carry out emergency buying of UK government bonds, or gilts.

Eyes are also on Tokyo as the yen sits around a three-decade low against the dollar owing to US rate hike expectations and the Bank of Japan’s refusal to tighten monetary policy, citing a need to support the economy.

The yen is approaching 150 to the dollar for the first time since 1990, but while officials have said they are keeping tabs on developments, they have yet to intervene in markets for a second time, having done so last month.

AFP