As The New Uk Finance Minister Brings Forward Policy Announcements To Today, The British Pound Appreciates

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Last Updated on October 17, 2022 by Bitfinsider

The British pound appreciated against the U.S. dollar on Monday morning after new U.K. Finance Minister Jeremy Hunt announced he would release portions of his medium-term fiscal plan later that day.

By 9 a.m. London time, the pound had risen approximately 0.8% to $1.1259, extending gains following the statement from the U.K. Treasury. Within an hour, the currency began to stabilize at $1.1170.

After an unprecedented sell-off that prompted the Bank of England to intervene and stabilize the market in the two weeks leading up to October 14, yields on long-term British government bonds, also known as gilts, have also declined. Prices move oppositely to yields.

By 9 a.m. London time, yields on 10-year gilts fell 30 basis points to trade around 4.029%. 5-year gilt yields decreased to 4.013%, while 2-year gilt yields dropped to 3.666%.

Following a dramatic day in British politics on Friday, which included major fiscal U-turns from Prime Minister Liz Truss and the dismissal of Finance Minister Kwasi Kwarteng, the market has moved significantly. Hunt, who is expected to make a statement on Monday at 11 a.m. local time, swiftly replaced him.

Monday’s announcements would arrive two weeks ahead of schedule. However, the full medium-term fiscal plan is still scheduled to be released on October 31, along with a forecast from the independent Office for Budget Responsibility — something that was absent from the original mini-budget released on September 23, which shook U.K. bond markets.

Similar to his predecessor, Hunt stated over the weekend that his top priority as finance minister is growth, but he emphasized that it will be “underpinned by stability.”

“The emphasis on economic expansion is warranted, as it allows more people to obtain good jobs, new businesses to flourish, and world-class public services to be secured. But we went too far, too quickly,” Hunt said in a Saturday statement.

Monday morning, Kit Juckes of Société Générale stated in a research note that the U.K. government’s message to the markets is “nothing to see here, please carry on as usual.”

“I’m not sure if it will be quite that simple, but gilt yields should fall, sterling volatility should vanish, and all that will be left will be recession, austerity, higher interest rates, and a lingering sense that this sterling crisis, more than its predecessors, was manufactured and avoidable,” he added.

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