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☆ U.K. Seeks to Calm Investors Over Clash Between Inflation Fight and Truss Tax Cuts
▼ + stars: | 2022-09-27 | by ( Paul Hannon | Max Colchester | ) www.wsj.com time to read: 1 min

The U.K. government, after a punishing week for the pound and bond market in London, tried Tuesday to reassure investors that it is working to better coordinate with the Bank of England as Prime Minister Liz Truss ’s tax cuts and energy subsidies complicate efforts to control spiraling inflation. U.K. Chancellor of the Exchequer Kwasi Kwarteng said he was meeting Bank of England Governor Andrew Bailey daily.

☆ 3 charts that show the UK's market meltdown
▼ + stars: | 2022-09-27 | by ( Jenni Reid | ) www.cnbc.com time to read: +2 min

A so-called "mini-budget" by the U.K.'s new government Friday has sparked a level of market volatility not seen in the country since the Covid crash or the Great Financial Crisis. It comes as inflation remains at 9.9% and the country has likely already entered a recession. The pound lost nearly 3.6% against the dollar Friday and continued to fall Monday when the market reopened. Yields on U.K. government bonds have rocketed following the government's budget — meaning their prices have fallen drastically (bond yields move inversely to prices). Soaring yields and a slumping pound have led some mortgage lenders to pause new home loans and withdraw certain mortgage offers.

☆ Reversing UK confidence crash requires policy U-turn: economists
▼ + stars: | 2022-09-27 | by ( Andy Bruce | ) www.reuters.com time to read: +2 min

Commuters, reflected in windows of an office, walk across London Bridge toward the financial district, in London, Britain, September 26, 2022. "The first step in regaining credibility is not saying incredible things," Summers said on Twitter on Tuesday. Register now for FREE unlimited access to Reuters.com RegisterSummers pointed to surging interest rates of long-dated British debt as a "hallmark of situations where credibility has been lost". On Monday the Bank of England and Treasury released statements in the hope of reassuring investors, with the central bank saying it would not hesitate to raise interest rates if needed. Register now for FREE unlimited access to Reuters.com RegisterEditing by Kate HoltonOur Standards: The Thomson Reuters Trust Principles.

☆ Bank of England says it won't take 'risky bets' to help City's competitiveness
▼ + stars: | 2022-09-27 | by ( Huw Jones | ) www.reuters.com time to read: +2 min

LONDON, Sept 27 (Reuters) - The Bank of England's new objective of helping the financial sector remain globally competitive should not encourage risky bets on regulatory standards to win business, BoE executive director Victoria Saporta said on Tuesday. Register now for FREE unlimited access to Reuters.com RegisterSaporta said the best way to maintain competitiveness is by having a regulatory regime that is open, predictable, transparent and aligned with international standards. Saporta said alignment with international standards makes it easier for international firms to conduct business in the UK. "Rhetoric" about Brexit dividends, deregulation and a Big Bang 2.0 means the City won't get access to the EU financial market in the forseeable future, Collier said. If we get it right, we should be a very vibrant and deep capital market," Collier said.

☆ Sterling higher as BoE, Treasury seek to calm markets
▼ + stars: | 2022-09-27 | by ( Samuel Indyk | ) www.reuters.com time to read: +3 min

UK pound coins plunge into water coloured with the European Union flag colours in this illustration picture, October 26, 2017. The BoE "will not hesitate" to raise interest rates if needed to meet its 2% inflation target, governor Andrew Bailey said on Monday. "The BoE saying it won't change course has helped the recovery in sterling as it conveys a message that there's no sense of panic at the central bank," Cole added. "UK markets will now be hyper-sensitive to any communication from UK policymakers," said ING head of markets Chris Turner in a note. Pill voted with the majority to raise interest rates by 50 basis points at last week's policy meeting.

☆ Morning Bid: A BoE Bitter Pill?
▼ + stars: | 2022-09-27 | by ( ) www.reuters.com time to read: +2 min

A commuter emerges from the London Underground near to the Bank of England, in London, Britain, September 26, 2022. The cost of money is moving so fast that mortgagees can't keep up and have pulled products to reprice them. Register now for FREE unlimited access to Reuters.com RegisterThe Bank of England said it wouldn't hesitate to raise rates. What that means, exactly, will be tested from 1100 GMT when chief economist Huw Pill appears at a panel event. Asia on Tuesday took profits on the U.S. dollar's surge and bid up stock futures a little bit, but signs of stress abound.

☆ UK lenders halt mortgage deals to customers after market chaos
▼ + stars: | 2022-09-27 | by ( Sophie Kiderlin | ) www.cnbc.com time to read: +3 min

Oli Scarff | Getty Images News | Getty ImagesLONDON - U.K. lenders Virgin Money, Halifax and Skipton Building Society pulled some of their mortgage deals to customers after the tumult in British bond markets. Virgin Money and Skipton Building Society temporarily paused mortgage offers for new customers, while Halifax — owned by the Lloyds Banking Group — is planning to halt any mortgage products with fees where lower interest rates are usually offered. Skipton Building Society said they had paused their products in order to "reprice following the market response over recent days." Markets have begun pricing in a base rate rise to as high as 6% for next year, from 2.25% currently, raising concerns among mortgage lenders and borrowers. "Households refinancing a two-year fixed rate mortgage in the first half of next year will see monthly repayments jump to about £1,490 early next year, from £863 when they took on the mortgage two years prior."

☆ The British pound is cratering against the dollar. Here's everything you want to know.
▼ + stars: | 2022-09-27 | by ( Phil Rosen | ) www.businessinsider.com time to read: +5 min

I'm Phil Rosen, and economic signals from our colleagues across the pond are deep in the red to start the week. No frills or tomfoolery today, out of fear that the pound will drop further before we get to the news. FILE PHOTO: British five pound banknotes are seen in this picture illustration Reuters1. Even after its third consecutive 75-basis-point hike last week, all signs point to more to come. What do you think is the Bank of England's best option to stop the pound from falling further?

The Bank of England is seen, in London, Britain, September 26, 2022. REUTERS/Peter Nicholls/File PhotoLONDON, Sept 27 (Reuters) - The Bank of England is likely to deliver a "significant policy response" to finance minister Kwasi Kwarteng's huge tax cuts but it should wait until its next scheduled meeting in November before making its move, BoE Chief Economist Huw Pill said. "I do want to flag clearly at this point that in my view the combination of fiscal announcements that we've seen will act as a stimulus," Pill told the Barclays-CEPR International Monetary Policy Forum in London on Tuesday. Some investors and economists have said the British central bank should hold an emergency meeting now to deliver a big interest rate hike to prop up the value of the pound and avoid further inflation pressure. The pound was higher against the dollar on Tuesday, a day after hitting a record low.

☆ UK mortgage borrowers are in for a nasty shock from soaring rates
▼ + stars: | 2022-09-27 | by ( Anna Cooban | ) edition.cnn.com time to read: +4 min

London CNN Business —Millions of mortgage borrowers in the United Kingdom are bracing themselves for huge hikes to their monthly payments as a consequence of the run on the pound. Markets had already been expecting the central bank to raise interest rates to 4.75% by next spring. There are 9 million outstanding residential mortgages in the United Kingdom, according to UK Finance, an association of banks and financial services firms. About 20% of those loans are tracker, or variable rate products, that typically become more expensive when the central bank hikes rates. Halifax, owned by Lloyds Bank (LLDTF), removed some of its mortgage products, while Virgin Money stopped taking mortgage applications from new customers until later this week.

☆ UK finance minister to meet Wall Street bankers - Bloomberg
▼ + stars: | 2022-09-27 | by ( ) www.reuters.com time to read: 1 min

LONDON, Sept 27 (Reuters) - British finance minister Kwasi Kwarteng is set to meet Wall Street bankers on Wednesday, Bloomberg reported, a day after he met asset management firms and insurance groups from the City of London following market turmoil over his fiscal plans. U.S. bank JPMorgan (JPM.N) were amongst firms that were invited for the meeting, the Bloomberg report said. Register now for FREE unlimited access to Reuters.com RegisterReporting by Muvija MOur Standards: The Thomson Reuters Trust Principles.

☆ UK swaps one cost-of-living crisis for another
▼ + stars: | 2022-09-27 | by ( Liam Proud | ) www.reuters.com time to read: +3 min

But the budget plans of new Prime Minister Liz Truss and her Chancellor Kwasi Kwarteng may cause a world of pain for mortgage borrowers. Surging interest rates will crimp spending and hurt the housing market, further undermining Truss and Kwarteng’s growth plans. Capital Economics reckons at Monday’s implied levels, mortgage costs could reach their highest level relative to borrowers’ income since 1990. Rather than having to bail them out, regulators and politicians may push lenders to offer repayment holidays or cut interest rates. It will find it equally difficult to let mortgage borrowers suffer alone.

☆ IMF says UK fiscal measures will 'likely increase inequality,' urges rethink
▼ + stars: | 2022-09-27 | by ( Andrea Shalal | ) www.reuters.com time to read: +2 min

New British Chancellor of the Exchequer Kwasi Kwarteng walks outside Number 10 Downing Street, in London, Britain September 6, 2022. REUTERS/Toby Melville/File PhotoWASHINGTON, Sept 27 (Reuters) - Fiscal measures adopted by Britain will likely increase inequality, a spokesperson for the International Monetary Fund said on Tuesday, urging UK authorities to consider providing more targeted support to affected families and businesses. "Given elevated inflation pressures in many countries, including the UK, we do not recommend large and untargeted fiscal packages at this juncture, as it is important that fiscal policy does not work at cross purposes to monetary policy," the spokesperson said in the IMF's first public reaction. The IMF understands that Britain's "sizable fiscal package" was intended to help residents deal with higher energy prices and to boost growth via tax cuts and supply measures, but such measures could put fiscal policy at cross purposes with monetary policy, the spokesperson said. Register now for FREE unlimited access to Reuters.com RegisterReporting by Andrea Shalal; Editing by Chizu Nomiyama and Jonathan OatisOur Standards: The Thomson Reuters Trust Principles.

☆ Markets are now treating UK bonds like Greek and Italian debt
▼ + stars: | 2022-09-27 | by ( Julia Horowitz | ) edition.cnn.com time to read: +6 min

The price of benchmark 10-year UK government bonds also increased slightly. “This is a situation where government borrowing costs — and therefore all our borrowing costs — are incredibly vulnerable,” economist Mohamed El-Erian, an adviser to Allianz, told the BBC on Tuesday. It will drive up import costs, adding to pressure on the Bank of England to hike interest rates faster and higher. Previously, markets were absorbing about £100 billion ($108 billion) in UK bonds annually, according to Ross Walker, chief UK economist at NatWest Markets. Yet higher borrowing costs will have consequences for both the government and households.

☆ UK finance minister will meet with Wall Street banks after the newly unveiled mini-budget sparked panic in markets and sent the pound plummeting
▼ + stars: | 2022-09-27 | by ( Carla Mozée | ) www.businessinsider.com time to read: +2 min

The UK Chancellor of the Exchequer Kwasi Kwarteng is scheduled to meet with Wall Street execs, Wednesday. Kwarteng is conducting outreach about the UK's newly announced mini-budget, Bloomberg reported. The pound dropped to a record low with investors spooked by the plan that includes £45 billion in tax cuts. The pound hit a low of $1.0350 on Monday but has since recovered some ground, trading at $1.0671 on Tuesday. Bank of England Governor Andrew Bailey said Monday the central bank was monitoring repricing in financial markets but didn't announce an emergency meeting.

☆ UK shop price inflation speeds up again to new high - BRC
▼ + stars: | 2022-09-27 | by ( ) www.reuters.com time to read: +1 min

LONDON, Sept 28 (Reuters) - The climb in prices charged by shops and supermarkets in Britain accelerated again in the 12 months to September, hitting its highest since records began in 2005, the British Retail Consortium said on Wednesday. Market research firm NielsenIQ, which co-produces the data, said 76% of consumers expected to be moderately or severely affected by the cost-of-living crisis over the next three months, up from 57% in the summer. Britain's consumer price index, which measures a broader range of prices than the BRC's data, hit a 40-year high of 10.1% in July before easing back to 9.9% in August. The cost of imported goods in Britain faces further inflationary pressure after a slump in the value of the pound triggered by the announcement of tax cuts by new finance minister Kwasi Kwarteng last week. Register now for FREE unlimited access to Reuters.com RegisterReporting by William Schomberg, editing by Andy BruceOur Standards: The Thomson Reuters Trust Principles.

☆ After high profile sacking, UK civil servants fear for jobs under Truss
▼ + stars: | 2022-09-27 | by ( Elizabeth Piper | ) www.reuters.com time to read: +7 min

"(It) creates a sense of fear inside the civil service at senior level which will prevent them for giving the honest advice to ministers that they need to hear," he told Reuters. Mark Serwotka, general secretary of the Public and Commercial Services Union, the largest trade union representing British civil servants, agreed. "I think the whole attitude towards civil servants from the political side is worsening," said one former civil servant on condition of anonymity. Former civil servants such as Kerslake fear for its future. "I call it the 'how high' phase, which is ministers saying jump and civil servants say how high," Kerslake said.

☆ Morning Bid: Unstable cable
▼ + stars: | 2022-09-26 | by ( ) www.reuters.com time to read: +5 min

Supercharging an already rampant U.S. dollar around the globe, the sterling/dollar rate - nicknamed 'cable' by traders - went into virtual freefall at one point early on Monday. The pound's plunge comes ahead big auctions of both long-term and inflation-linked British government bonds this week and increasing liquidity issues in the gilt markets. read moreThe scale of the pound's losses and fiscal fears has many traders speculating about emergency rate rises by the Bank of England. Rate futures now price in a three-quarters-of-a-point hike to 3% on or before the BoE's next meeting on Nov. 2. read moreChina also acted in a different way on Monday to rein in yuan ongoing slump against the dollar.

☆ Sterling sinks to new low as 'mini budget' shatters investor faith in UK markets
▼ + stars: | 2022-09-26 | by ( Amanda Cooper | ) www.reuters.com time to read: +5 min

"It also puts more pressure on the Bank of England to increase interest rates," she added. read moreScottish First Minister Nicola Sturgeon called for the Westminster parliament to be recalled to hold an emergency session. "It's hard to overstate the scale of the economic crisis caused by Friday's UK budget," she said on Twitter. read moreEYES ON BOEIn light of the rout, strategists and economists said the Bank of England needs to do something to calm markets and restore credibility. "The market is now treating the UK as if it's an emerging market.

☆ Sterling crumbles to all-time low, euro at 20-year low
▼ + stars: | 2022-09-26 | by ( Dhara Ranasinghe | ) www.reuters.com time to read: +4 min

Register now for FREE unlimited access to Reuters.com RegisterBut it was sterling's slide that rippled across markets, down as much as 4.9% to an all-time low of $1.0327 . Sterling was also down 1% against the euro, having hit its lowest since September 2020 at 92.60 pence . The euro also touched a fresh 20-year trough at $0.9528 and was last down 0.5%. And the dollar index - where the basket includes sterling, the euro and the yen - reached 114.58 for the first time since May 2002, reflecting the greenback's broad strength. The risk-sensitive Australian dollar dropped to $0.64845, its lowest since May 2020, and the Canadian dollar touched 1.3638 to its U.S. counterpart, its weakest since July 2020.

☆ Sterling sinks to new low as 'mini budget' hits investor faith in UK markets
▼ + stars: | 2022-09-26 | by ( Amanda Cooper | ) www.reuters.com time to read: +4 min

read moreOn Friday, he announced that he would cut a raft of taxes, but he did not detail how the government would fund it. , read moreIn light of the rout, strategists and economists said the Bank of England needs to do something to calm markets and restore credibility. The FTSE 100 (.FTSE) was roughly flat on the day, while the domestically focussed FTSE 250 (.FTMC) fell 1%. '1980S ON STEROIDS'Paul Dales, Capital Economics chief UK economist, said the central bank needed to take action. "The market is now treating the UK as if it's an emerging market.

☆ Britain’s Sketchy Growth Plan Is Scarier Than Its Bond Vigilantes
▼ + stars: | 2022-09-26 | by ( Jon Sindreu | ) www.wsj.com time to read: +1 min

A big selloff in gilts points to worries about too much supply, and to the possibility that the BOE could raise borrowing costs even faster than expected. The expansive, expensive economic policy of new U.K. Prime Minister Liz Truss has revived fears of “bond vigilantes.” But the turmoil in financial markets may have more to do with the plan’s unclear return on investment than its hefty borrowing requirements. On Monday, sterling dropped to a record low against the U.S. dollar in overnight trading before rebounding slightly. Investors already expected Ms. Truss’s new government to spend north of £150 billion, equivalent to $163 billion, to freeze energy bills, but on Friday her Treasury chief, Kwasi Kwarteng , paired this with the most sweeping tax cuts since 1972, according to the independent Institute for Fiscal Studies, as well as totemic measures such as scrapping a cap on bankers’ bonuses. The total package will cost £291 billion, or a colossal 12.6% of gross domestic product, over the next five years, according to estimates by UBS economist Anna Titareva .

☆ British pound plummets to new lows as tax cuts spark concern
▼ + stars: | 2022-09-26 | by ( Associated Press | ) www.nbcnews.com time to read: +3 min

The British pound fell to all-time low against the U.S. dollar early Monday after Treasury chief Kwasi Kwarteng pledged a sweeping package of tax cuts, fueling concerns about the government’s economic policy as the United Kingdom creeps toward recession. The pound fell as low as $1.0373, before rallying to $1.0672 in early London trading. The British currency has lost more than 5% of its value against the dollar since Friday, when Kwarteng announced the biggest tax cuts in 50 years. But U.K. inflation is the highest among major economies, and the bank has predicted a recession later in the year. The British currency has dropped more than 24% against the dollar since its recent peak of $1.4181 on May 27, 2021.

☆ Sterling crumbles to all-time nadir, euro at 20-year low
▼ + stars: | 2022-09-26 | by ( Dhara Ranasinghe | ) www.reuters.com time to read: +3 min

Sterling also tumbled 1.3% against the euro, having hit its lowest since September 2020 at 92.60 pence . Kit Juckes, head of currency strategy Societe Generale in London, said markets had a tendency to overshoot but noted two points on sterling's slide. "The second is that the mini budget has allowed sterling to be the short of choice against the dollar." The euro also touched a fresh 20-year trough at $0.9528 , as the pound's slide rippled across markets. China's offshore yuan slid to a new low of 7.1728 per dollar, its weakest since May 2020.

☆ Sterling crumbles to record low, dollar soars on UK fiscal angst
▼ + stars: | 2022-09-26 | by ( Kevin Buckland | ) www.reuters.com time to read: +3 min

Register now for FREE unlimited access to Reuters.com RegisterWoman holds British pound banknotes in this illustration taken May 30, 2022. The British pound's searing drop helped the safe-haven U.S. dollar to a new two-decade peak against a basket of major peers. Fellow commodity currency the Canadian dollar reached a fresh trough at C$1.3625 per greenback, its weakest since July 2020. China's offshore yuan slid to a new low of 7.1630 per dollar, its weakest since May 2020. Register now for FREE unlimited access to Reuters.com RegisterReporting by Kevin Buckland Editing by Shri Navaratnam and Sam HolmesOur Standards: The Thomson Reuters Trust Principles.

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