The pound bounces back: Sterling recovers from its losses


Pound bounces back: Sterling recovers from losses as it hits a week-long high of $1,222 early in Asian trading – as Liz Truss ready to meet fiscal watchdog

  • The pound rose as much as 0.8 percent against the dollar this morning to $1.222
  • Sterling took an aggressive pendulum down in the wake of the mini-Budget
  • Other currencies around the world have also been crushed by the dollar this year







The pound fought back in global currency markets today after plunging to an all-time low against the US dollar.

The pound rose as much as 0.8 percent against the dollar this morning to $1,222 in Asia, putting it nearly the same distance it was before Chancellor Kwasi Kwarteng delivered last week’s controversial mini-budget.

In an effort to reassure the financial markets, Liz Truss and Mr. Kwarteng are holding sharp talks today with the UK’s spending watchdog, the Office for Budget Responsibility.

Ms Truss has vowed to push ahead with the growth agenda despite mounting fears on Tory’s benches – especially after a shock YouGov poll showed last night that Labor had a 33-point lead.

A currency trader looks at the monitors in the currency trading room of KEB Hana Bank headquarters in Seoul, South Korea

A currency trader looks at the monitors in the currency trading room of KEB Hana Bank headquarters in Seoul, South Korea

Like other currencies around the world, the pound has been crushed by the dollar this year as the US Federal Reserve tries to tame skyrocketing inflation through higher interest rates.

The dollar has also benefited from its status as a safe asset in times of economic struggle.

But the pound took an aggressive plunge in the wake of the mini-budget as investors worried about £45bn in unfunded tax cuts and a cap on energy bills that could cost £100bn.

The Bank of England has also been criticized for being too slow and docile to fight inflation, which hit 10 percent this summer for the first time in four decades.

The currency chaos spread to bond markets, forcing the Bank to intervene on Wednesday with a pledge to buy long-term UK government debt to restore order.

In a speech to business leaders in London last night, Huw Pill, the chief economist at the Bank of England, said there would be a “major” response to recent events when the rate-setting Monetary Policy Committee meets again in early November.

Many observers expect the Bank to raise interest rates by as much as one percentage point – much larger than the 0.25 and 0.5 percentage point moves so far this year.

The bond market intervention and the prospect of further rate hikes lifted the pound.

Brian Daingerfield, head of G10 FX strategy at NatWest Markets in Connecticut, said: “The Bank of England has taken quite a decisive step in stabilizing the markets. And that is positively received by the foreign exchange market.’

But as inflation ran rampant and global interest rates rose, government borrowing costs in the form of bond yields rose again in the UK, US and Europe.

Neil Wilson, an analyst at, said, “I’ve rarely seen sentiment this bad. ‘We are doomed’ seems to be the predominant mood.

‘We haven’t seen the bond markets like this in years. Stocks are hovering around the two-year low and the dollar is moving quietly, crushing everything in its path.”

Despite the chaos in the financial markets, allies of Ms. Truss have urged the Prime Minister to stick to her guns, but insist that she and Mr. Kwarteng need to improve the way they communicate their plans to voters and markets. .

The OBR confirmed that it offered to provide preliminary forecasts in time for the budget a week ago, but was rejected.

The Chancellor’s tax cuts and the energy bill bailout have raised the alarm that UK borrowing could spiral out of control, but it now appears that ministers are planning to cut spending.

Benefits may not be topped up in line with rampant inflation, as expected.

In a round of interview this morning, City Secretary Andrew Griffith told Sky News: ‘I think it’s a very good idea that the Prime Minister and Chancellor sit down with the independent OBR – just like the independent Bank of England they have a really important role to play. to play.

“We all want the forecasts to be as fast as possible, but as a former CFO, I also know you want them to have the right level of detail.”

Asked about reports that the OBR could have made in time for the mini-budget, Mr Griffith said: ‘That forecast didn’t have the growth measures in that plan. They were completed in the hours before the chancellor rose.’