Pound dips back from two-week high as Kwarteng will no longer bring forward debt plan
The pound has retreated from its two-week high after Kwasi Kwarteng backtracked on the announcement that his debt-reduction plans and official economic forecasts would be published sooner than expected.
After climbing to to around $1.135 this Tuesday morning, it is now trading at around $1.141.
Markets were caught by surprise after Kwasi Kwarteng indicated he will not be bringing forward his fiscal plan – just hours after telling the Conservative conference it would be published “shortly”.
Managing director for Europe at Euroasia Group, Mujtaba Rahman called it "another cock-up".
‼️ Kwarteng tells GB News MT fiscal plan will still be on 23 Nov. Another cock-up. He’ll have to correct it & bring it forward as markets have already given Govt credit for accelerating it. What a mess! Couldn't make this stuff up https://t.co/5dR8QCEnks
— Mujtaba Rahman (@Mij_Europe) October 4, 2022
Read more: Kwarteng's reversal of 45p tax cut: Richest 5% households still stand to gain most
Analysts are still bearish on the outlook as the UK government tries to reassure markets after its mini-budget shattered investor confidence.
Standard Chartered and Royal Bank of Canada both expect the pound to fall almost 10% from current levels by the end of the year.
Nomura and Morgan Stanley are forecasting it will drop to parity with the dollar during the same period.
Kamal Sharma, FX strategist at Bank of America, said: "We continue to maintain a bearish view on GBP and look for GBP/USD to breach 1.10 and EUR/GBP through 0.90.
“In our view, the risks are rising for a more disorderly unravelling unless the market can be convinced that the UK has a credible plan to tackle the large structural imbalance"
Disarray in Team Truss becomes farcical. Huge confusion over crucial financial statement meant to reassure markets.
It’s coming forward.
No, still November 23rd.
No, we’re just saying that because we haven’t fixed new date yet.
No it’s 23rd.
Masterclass in how not to reassure— Andrew Neil (@afneil) October 4, 2022
Read more: Does Kwarteng's tax U-turn mean interest rate won't rise to 6% as predicted?
The chancellor has been under pressure to provide more details on his economic strategy – including independent forecasts to back the plans up – since announcing the biggest package of tax cuts in half a century.
In his speech to the Tory conference on Monday, Kwarteng said it would be published "shortly".
He said the announcement will “set out how we plan to get debt falling as a percentage of GDP over the medium term”, adding: “We will act in a fiscally sustainable and responsible way.”
Kwarteng has also blamed the “pressure” caused by the death of Queen Elizabeth for the dramatic market reaction to his mini-budget.
Watch: Pound strengthens on UK government’s plans to scrap tax cut for wealthy
