Pound gains as new Chancellor Jeremy Hunt set to announce financial plan
The pound rebounded as Britain’s chancellor announced he would make an emergency fiscal statement in a bid to calm market chaos.
Jeremy Hunt is expected to release billions of pounds in savings to stabilize public finances after his predecessor’s mini-budget spooked markets.
The pound made gains on Monday, rising from just over $1.12 in early trading to just under $1.13 around 6.45am – shortly after Mr Hunt announced a a declaration of emergency.
The pound fell to around $1.25 later in the morning.
It follows a crisis after Kwasi Kwarteng was sacked as chancellor on Friday just weeks into his role.
The pound fell to a record low during Mr Kwarteng’s tenure amid fallout from the Mini Budget, which promised a host of tax cuts, including for the wealthiest in society.
The Bank of England launched an emergency bond buying program late last month amid market turbulence. He said the program – which completed around £19.3bn in purchases and closed on Friday – “has delivered a significant increase in the resilience of the sector”.
The central bank has launched a program to buy up to £65billion of UK government bonds, known as gilts, to help stabilize prices amid sell-offs amid concerns over government cuts. unfunded taxes in the former chancellor’s mini-budget.
After his surprise appointment as chancellor, Mr Hunt effectively tore up Ms Truss and Mr Kwarteng’s previous economic strategy of cutting taxes in a bid to spur growth.
Instead, he warned that taxes would have to rise while spending grew less rapidly than expected.
The Treasury said Monday’s emergency declaration was aimed at “ensuring that sustainable public finances support economic growth”.
Among the measures announced by Mr Kwarteng which are likely to be scrapped are his promise to bring forward a 1 pence cut in the basic rate of income tax until April.
After delivering his quick statement, the Chancellor will address the House of Commons ahead of the publication of his comprehensive medium-term budget plan on October 31.
The measures come as Ms Truss continues to fight to retain her leadership, with three Tory MPs already breaking ranks to call on her to leave.
The government has already been forced to make two U-turns since taking office after the mini-budget sparked chaos and backlash from the market.
He cut tax cuts for top earners earlier this month. Shortly after Mr Kwarteng was sacked on Friday, Ms Truss announced a U-turn in corporation tax after the mini-budget promised to scrap a planned increase.
Mr Hunt conducted something of a media blitz on behalf of the Prime Minister over the weekend. He insisted she was still in charge even though he diagnosed the need for a tough package of tax hikes and spending cuts to stabilize Britain’s economy.
Additional reporting by Press Association