Pound soars as new Chancellor unveils contingency budget plan

The pound jumped on news that new Chancellor Jeremy Hunt is due to issue an emergency declaration on Monday to calm the chaos in financial markets.

The pound jumped to US$1.129 at one point, having started more nervously, plunging to 1.122 against the greenback in overnight trading ahead of what many feared was a test day in the markets.

The Treasury’s announcement of an emergency fiscal declaration came ahead of the opening of markets for the first time since the Bank of England ended its government bond buying programme, all eyes being on the reaction of the gilt trade.

The Bank stuck to its guns by ending its emergency gilt buying program on Friday despite fears of a return to volatile market conditions that sparked a damaging gilt selloff that left some funds pension on the verge of collapse.

Mr Hunt’s decision also comes as speculation swirls about Liz Truss’ future as Prime Minister.

Susannah Streeter, principal investment and market analyst at Hargreaves Lansdown, said: ‘New Chancellor Jeremy Hunt looks like a troubleshooter brought in to fix a failing school and faces his first big presentation test today. today with an emergency budget plan sent to try to calm the financial markets.

“It’s all part of his charm offensive to inspire confidence in the government’s ability to be fiscally responsible, but behind him, unruly students still intrigue.”

She added: ‘Today’s developments could delay a further attack on government borrowing costs by bond vigilantes standing ready in the UK gilt market, but that could only be a temporary reprieve. .

“Trussenomics may have been torn up and put in the shredder, but the author of the big bet remains in power and has the final say on the direction of travel.

“Investors are hungry for more stability but, given the about-face we’ve had so far in his very short tenure, economic policy uncertainty remains and that’s likely to be the main driver in markets. bonds and exchange offices.

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