Pound claws back budget-shock loss on bets for policy revamp
BNN Bloomberg
The pound rallied for a fourth day as traders speculated the UK government will water down fiscal policies that pummeled the currency to a record low at the start of the week.
Sterling soared over 1 per cent on Friday to US$1.1234, surpassing levels seen before the Chancellor of the Exchequer Kwasi Kwarteng announced plans for debt-fueled tax cuts in Parliament a week ago. The currency was also supported by a slide in government bond yields following intervention by the Bank of England to stem the turmoil.
The moves cap an extremely volatile week for UK markets. Investors are looking at reports that the government is coming under political pressure from its own party to water down proposals or cut spending, as voter polls show support ebbing. Prime Minister Liz Truss is set to hold talks with the government’s fiscal watchdog on Friday.
“The pound is benefiting from abating UK sovereign credit risks after the decisive BOE intervention in the gilt markets and, more importantly, growing market hopes that the Truss government would reassess its fiscal stimulus plans,” said Valentin Marinov, head of currency strategy at Credit Agricole SA.
