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☆ Sterling plunges to all-time low as fiscal plan spurs investor exodus
▼ + stars: | 2022-09-26 | by ( Kevin Buckland | ) www.reuters.com time to read: +3 min

Sterling tumbled as low as $1.0327, an all-time nadir, and last traded 3.34% weaker at $1.0490. A former top Japanese currency official said Monday that policymakers likely won't try to defend a certain level, such as the 145 mark, but only conduct any further operations to smooth volatility. read moreThe dollar index was 0.76% higher at 114, and earlier reached 114.58 for the first time since May 2002. 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 level since May 2020.

☆ UK housing index at 11-year low on rate-hike fears
▼ + stars: | 2022-09-26 | by ( Yadarisa Shabong | ) www.reuters.com time to read: +2 min

Register now for FREE unlimited access to Reuters.com RegisterEstate agent signs are seen outside a residential housing in south London, Britain, August 6, 2021. Register now for FREE unlimited access to Reuters.com RegisterThe housebuilders index fell 6% to hit its lowest level since March 2013. "The weak pound is driving expectations for further rate increases, which means lower house prices," Peel Hunt analyst Sam Cullen said. Shares of Taylor Wimpey hit their lowest since 2014, Persimmon since 2016, and Barratt and Berkeley stocks since March 2020. Register now for FREE unlimited access to Reuters.com RegisterReporting by Yadarisa Shabong in Bengaluru; Editing by Anil D'Silva and Shounak DasguptaOur Standards: The Thomson Reuters Trust Principles.

☆ Bank of England tries to calm panicked markets
▼ + stars: | 2022-09-26 | by ( Julia Horowitz | ) edition.cnn.com time to read: +2 min

London CNN Business —UK policymakers are trying to calm markets after a plan by Prime Minister Liz Truss to cut taxes while ramping up borrowing sparked panic among investors worried it could feed inflation and destabilize government finances. The UK pound has plunged and government bonds have collapsed since Truss and Kwarteng revealed their economic program on Friday. It’s intended to spur economic growth, but has fed alarm among investors, who are worried about the unorthodox approach. “It remains to be seen whether today’s statement by the government and the Bank of England will be enough to ease the markets’ fears about the government’s fiscal policy,” said Paul Dales, chief UK economist at Capital Economics. “The initial reaction in the markets, with the pound falling again after it regained some ground, suggests that the issue may not be put to bed yet.”

☆ Pound tanking, massive tax cuts and talk of emergency hikes. Here's what's going on in the UK
▼ + stars: | 2022-09-26 | by ( Elliot Smith | ) www.cnbc.com time to read: +6 min

Jim O'Neill, former Goldman Sachs Asset Management chairman and a former U.K. Treasury minister, said the pound's fall shouldn't be misinterpreted as dollar strength. The announcement Friday featured a volume of tax cuts not seen in Britain since 1972 and an unabashed return to the "trickle-down economics" promoted by the likes of Ronald Reagan and Margaret Thatcher. The radical policy moves set the U.K. at odds with most major global economies against a backdrop of sky-high inflation and a cost-of-living crisis. Ibrahim added that this would imply further suffering for U.K. financial markets due to the "unfavorable policy mix" over the near term. The British lender expects the government to clarify its plans to balance the books through "spending cuts and reform outcomes" ahead of the November budget statement, which Montagne suggested "should help to deflect immediate concerns relating to large unfunded tax cuts."

☆ UK bond prices collapse after sterling hits record low
▼ + stars: | 2022-09-26 | by ( David Milliken | ) www.reuters.com time to read: +2 min

REUTERS/Dado Ruvic/Illustration/LONDON, Sept 26 (Reuters) - British government bond prices collapsed on Monday, pushing yields to their highest in over a decade, amid speculation that the Bank of England might need to take emergency action after sterling hit a record low against the U.S. dollar overnight. Two-year gilt yields rose as much as 54 basis points on the day to 4.533%, their highest since September 2008, and at 0754 GMT were 44 basis points up on the day at 4.43%. Five-year gilt yields jumped more than 44 basis points to 4.503%, their highest since October 2008, while benchmark 10-year yields hit their highest since April 2010 at 4.215%. read moreBond market veteran Mohamed El-Erian, chief economic advisor to Allianz, said Kwarteng either needed to reverse course, or to prepare for an emergency BoE rate hike. The BoE raised interest rates by half a percentage point to 2.25% on Thursday - its second consecutive half-point hike, after not increasing rates by that amount since 1995.

A general view of the Bank of England (BoE) building, the BoE confirmed to raise interest rates to 1.75%, in London, Britain, August 4, 2022. REUTERS/Maja Smiejkowska/File PhotoLONDON, Sept 26 (Reuters) - Bank of England Governor Andrew Bailey said on Monday that the BoE "will not hesitate" to raise interest rates if needed to meet its 2% inflation target, and that it was watching financial markets "very closely" following sharp moves in asset prices. "The Bank is monitoring developments in financial markets very closely in light of the significant repricing of financial assets," Bailey said in a statement. However, traders viewed the BoE statement has decreasing the likelihood of a move before the BoE's next scheduled rate announcement on Nov. 3. Sterling fell more than a cent against the dollar and interest rate swaps for one week ahead priced in substantially lower rates than immediately before.

☆ UK tax cuts will benefit the rich more than anyone else
▼ + stars: | 2022-09-26 | by ( Anna Cooban | ) edition.cnn.com time to read: +3 min

On Friday, UK finance minister Kwasi Kwarteng announced a bumper set of tax cuts, including scrapping the top rate paid by the highest earners, and reductions in duties paid on house purchases. That’s the biggest tax cut in half a century, according to the Institute for Fiscal Studies. Kwarteng slashed the top rate of income tax — paid by those earning over £150,000 ($161,327) — to 40% from 45%. Kwarteng also announced he would accelerate a plan to cut the basic rate of income tax from 20% to 19%. ‘More to come’Kwarteng told the BBC on Sunday that his tax cuts “favor people right across the income scale.”“We’ve actually put more money into people’s pockets,” he told the broadcaster.

☆ Sterling plunges to all-time low in scathing appraisal of fiscal plan
▼ + stars: | 2022-09-26 | by ( Kevin Buckland | ) www.reuters.com time to read: +3 min

REUTERS/Dado Ruvic/Illustration/TOKYO, Sept 26 (Reuters) - Sterling tumbled nearly 5% to an all-time low on Monday as investors ran for the exits after the new government's fiscal plan threatened to stretch Britain's finances to their limits. Register now for FREE unlimited access to Reuters.com RegisterSterling was last down 2.7% at $1.0560. In total, the plans will require an extra 72 billion pounds of government borrowing over the next six months alone. "In this environment, you either need to see much higher growth - which isn't happening at the moment - or you need to see significantly higher bond yields to incentivise capital inflows. To get bond yields up to those levels, you need to see the Bank of England coming out and doing an emergency hike."

☆ Pound to dollar: The pound's crash will make inflation worse
▼ + stars: | 2022-09-26 | by ( Julia Horowitz | ) edition.cnn.com time to read: +7 min

Consequently, the Bank of England will come under pressure to jack up interest rates further and faster. It has been sharply critical of the UK government’s proposals. Why a plunging pound is bad newsThe pound hit a record low against the dollar on Monday, dropping near $1.03 before recovering to almost $1.07. Investors expect the Bank of England will need to increase interest rates much more aggressively to get inflation in check. The central bank has given no indication it will hike interest rates outside its normal schedule of meetings.

☆ The pound’s crash will make inflation worse and push interest rates higher
▼ + stars: | 2022-09-26 | by ( Julia Horowitz | ) edition.cnn.com time to read: +7 min

Consequently, the Bank of England will come under pressure to jack up interest rates further and faster. It has been sharply critical of the UK government’s proposals. Investors expect the Bank of England will need to increase interest rates much more aggressively to get inflation in check. The central bank has given no indication it will hike interest rates outside its normal schedule of meetings. “If markets still don’t have faith in the fiscal picture, I’m not sure how the Bank of England wins this,” Rossiter said.

☆ Market chaos forces UK lenders to pull mortgage products
▼ + stars: | 2022-09-26 | by ( Andy Bruce | ) www.reuters.com time to read: +3 min

Brokers said the moves were likely just the start of a big shift in Britain's mortgage market. The country's largest mortgage lender Halifax said it was withdrawing its fee-paying mortgage products - where borrowers could pay an arrangement fee in exchange for a lower interest rate - and moving to a full fee-free range. "In response, we will be temporarily withdrawing our New Business Product Range with immediate effect." Virgin Money said its withdrawal of mortgage products for new customers would take place at 8 p.m. (1900 GMT). "That will feed into higher mortgage rates and, as always, it'll be the taxpayer left carrying the can," said Lewis Shaw, founder of broker Shaw Financial Services.

☆ Euro zone yields at multi-year highs, Italian bonds underperform
▼ + stars: | 2022-09-26 | by ( Stefano Rebaudo | ) www.reuters.com time to read: +4 min

Register now for FREE unlimited access to Reuters.com RegisterSept 26 (Reuters) - Euro zone government bond yields jumped to multi-year highs amid expectations that central banks will keep tightening their monetary policy despite recession risks and a new sell-off in British gilts. Meanwhile, the spread between Italian and German yields widened after the rightist coalition won a clear majority in Sunday's elections. Italian bond (BTP) prices are also more susceptible to shifts in interest rate expectations, given the country's vast debt burden. Giorgia Meloni looks set to become Italy's first woman prime minister at the head of its most right-wing government since World War Two. "Bond yields across Europe are correlated, and today's jump in Britain yields is again affecting the euro area," he added.

☆ Forget a soft landing. The market’s best hope is a ‘growth’ recession
▼ + stars: | 2022-09-26 | by ( Nicole Goodkind | ) edition.cnn.com time to read: +7 min

It wants to achieve a soft landing — that Goldilocks ideal of cooling the economy enough to bring down prices but not enough to cause a recession. The new aim appears to be for a so-called growth recession: A prolonged period of meager growth and rising unemployment. The pain is sharper and lasts longer than that of a soft landing, but a “growth” recession doesn’t pull the entire economy into contraction the way a proper recession would. It looks like a recession, and feels like a recession, but it isn’t a recession — at least not officially. A growth recession is still painful.

☆ Hedge funds mounted bearish UK bets as Truss became PM
▼ + stars: | 2022-09-26 | by ( Nell Mackenzie | ) www.reuters.com time to read: +3 min

LONDON, Sept 26 (Reuters) - In the first half of September bets against sterling posted the biggest two-week rise since 2013, a sign that hedge funds may have ramped up short positions just as Liz Truss became Britain's new Prime Minister. According to Vanda Research, which uses data from the U.S. Commodity Futures Trading Commission (CFTC), short contracts of GBP/USD made by leveraged funds in the first two weeks of September jumped 17 percentage points. Speculators have trimmed their net short position on the British pound to 54,843 contracts last week valued at $3.9 billion, down from a previous net short position of 68,086 contracts, figures from the CFTC show. CFTC data showed speculators have maintained short positions against the pound every week since February. Gargour has had positions in the pound but because of UK marketing regulations could not confirm if he was short.

An employee is seen walking over a mosaic of pound sterling symbols set in the floor of the front hall of the Bank of England in London, in this March 25, 2008 file photograph. Yet the rapid rise in yields investors now receive for owning UK bonds hasn't helped sterling much. Pound slumps and UK borrowing costs surgePredicting the short-term direction of currencies is notoriously hard. Against the euro the pound is only at two-year lows, although it is down 3% since Friday. "People will look at the UK and think that that's not a market that is stable," said Payne at Janus Henderson.

☆ The pound just plunged to an all-time low against the dollar. Here's why the promise of tax cuts tanked the British currency.
▼ + stars: | 2022-09-26 | by ( Theron Mohamed | ) www.businessinsider.com time to read: +3 min

It plunged on fears impending tax cuts will worsen inflation and prompt faster interest-rate hikes. The UK economy is already battling slower growth and a cost-of-living crisis. On Sunday, Kwarteng hinted there could be even more tax cuts coming. His tax cut plan is aimed at boosting the ailing UK economy and reducing the risk of a severe recession. Some investors don't believe the impending tax cuts will be fully-funded, meaning the UK government's debt pile will grow.

☆ Bank of England says it won't hesitate to hike rates after pound falls to historic low
▼ + stars: | 2022-09-26 | by ( Sam Meredith | ) www.cnbc.com time to read: +1 min

Analysts expect the Bank of England may need to raise interest rates more aggressively following market turbulence on Monday morning. LONDON — The Bank of England on Monday said it is monitoring financial market developments "very closely" after a dramatic morning of turmoil saw the British pound fall to an all-time low against the U.S. dollar. The U.K. currency pared some of its losses through the session but extended its fall versus the dollar immediately after the Bank of England's statement. "The Bank is monitoring developments in financial markets very closely in light of the significant repricing of financial assets," Bank of England Governor Andrew Bailey said in a statement. "The role of monetary policy is to ensure that demand does not get ahead of supply in a way that leads to more inflation over the medium term," Bailey said.

☆ Reactions: Britain's pound crumbles to record lows in firesale of UK assets
▼ + stars: | 2022-09-26 | by ( ) www.reuters.com time to read: +8 min

Wads of British Pound Sterling banknotes are stacked in piles at the Money Service Austria company's headquarters in Vienna, Austria, November 16, 2017. REUTERS/Leonhard Foeger/File PhotoLONDON, Sept 26 (Reuters) - Britain's pound plunged to record lows on Monday and bonds were slammed for a second day, as investors punished UK assets after the government's mini-budget announcement last week. The presentation of the mini-budget was received quite badly by the markets – sterling literally collapsed. The significant tax cuts announced by the Treasury Secretary cause concerns for the currency markets because of rising government debt." One is the loss of confidence in UK fiscal policy and that won't help sterling.

☆ Morning Bid: Pounded
▼ + stars: | 2022-09-26 | by ( ) www.reuters.com time to read: +2 min

Pound and U.S. dollar banknotes are seen in this illustration taken January 6, 2020. On Friday, gilts suffered their heaviest selling in decades, and before that, the yen and U.S. interest rate futures have been roiled. Global tension is also mounting over the war in Ukraine, as Russia holds widely-criticised votes aimed at annexing territory it has taken by force. Besides sterling, Asian stock markets fell on Monday. European futures fell 0.3% and S&P 500 futures fell 0.6%.

☆ The rich are the biggest winners of Britain's tax-cutting gamble
▼ + stars: | 2022-09-26 | by ( Anna Cooban | Cnn Business | ) edition.cnn.com time to read: 1 min

London (CNN Business) The United Kingdom's big tax-cutting gamble to boost economic growth will benefit the rich far more than millions of people on lower incomes. On Friday, UK finance minister Kwasi Kwarteng announced a bumper set of tax cuts , including scrapping the top rate paid by the highest earners, and reductions in duties paid on house purchases. The UK Treasury estimates that the cuts will wipe £45 billion ($48 billion) off annual government revenues over the next five years. That's the biggest tax cut in half a century, according to the Institute for Fiscal Studies. Kwarteng slashed the top rate of income tax — paid by those earning over £150,000 ($161,327) — to 40% from 45%.

☆ UK home asking prices rise, tax cuts to spur demand: Rightmove
▼ + stars: | 2022-09-25 | by ( ) www.reuters.com time to read: +2 min

Register now for FREE unlimited access to Reuters.com RegisterLONDON, Sept 26 (Reuters) - Asking prices for British homes advertised rose solidly this month and last week's cut to property purchase tax announced by finance minister Kwasi Kwarteng could fuel demand further, property website Rightmove said on Monday. Prices rose by 8.7% in annual terms after an 8.2% increase in August, with the average asking rising to 367,760 pounds ($399,240), Rightmove said. "Friday's announcement is likely to stimulate some more demand (in the housing market)," Rightmove director of property science Tim Bannister said. Rightmove's index of asking prices, which is not seasonally adjusted, typically falls in November and December. ($1 = 0.9211 pounds)Register now for FREE unlimited access to Reuters.com RegisterReporting by David Milliken, editing by Andy Bruce and Angus MacSwanOur Standards: The Thomson Reuters Trust Principles.

CNN —The British pound fell to a new record all-time low against the US dollar of $1.035 on Monday, plummeting more than 4%. The slide came as trading opened in Asia and Australia on Monday, extending a 2.6% dive from Friday — and spurring predictions the pound could plunge to parity with the US dollar in the coming months. The unprecedented currency slump follows British Chancellor of the Exchequer Kwasi Kwarteng’s announcement on Friday the United Kingdom would impose the biggest tax cuts in 50 years at the same time as boosting spending. Former Tory chancellor Lord Ken Clarke criticized the tax cuts on Sunday, saying it could lead to the collapse of the pound. The previous record low for the British pound against the US dollar was 37 years ago on February 25, 1985, when 1 pound was worth $1.054.

Shadow Chancellor of the Exchequer Rachel Reeves is interviewed outside the BBC in London, Britain, October 24, 2021. REUTERS/Peter Nicholls/File PhotoLIVERPOOL, England, Sept 25 (Reuters) - Britain's Labour Party will unveil on Monday its plans to set up a national wealth fund to invest in green projects which will benefit the public, part of the opposition party's answer to the Conservative government's tax-cutting approach. The so-called mini-budget has opened up a divide between Prime Minister Liz Truss's Conservatives and the Labour Party of Keir Starmer, who wants to use the years before an expected election in 2024 to prove his team is ready for power. "That is a real plan for growth," she will say, taking aim at the "Growth Plan" presented by finance minister Kwasi Kwarteng on Friday, when Labour accused him of prioritising the wealthy over working people struggling with rising prices by turning to the discredited theory of "trickle-down economics". Ed Miliband, Labour's climate policy chief, said Labour's plans would return jobs to Britain.

☆ UK's Kwarteng says he is focused on growth, not market
▼ + stars: | 2022-09-25 | by ( ) www.reuters.com time to read: +1 min

New British Chancellor of the Exchequer Kwasi Kwarteng walks outside Number 10 Downing Street, in London, Britain September 6, 2022. REUTERS/Toby MelvilleLONDON, Sept 25 (Reuters) - British finance minister Kwasi Kwarteng said on Sunday that he was focused on boosting longer-term growth, not on short-term market moves, when challenged over the sharp fall in sterling and bond prices following his first fiscal statement. "As chancellor of the exchequer, I don't comment on market movements. What I am focused on is growing the economy and making sure that Britain is an attractive place to invest," he told the BBC. Register now for FREE unlimited access to Reuters.com RegisterReporting by Alistair Smout, writing by David MillikenOur Standards: The Thomson Reuters Trust Principles.

Britain's Labour Party leader Keir Starmer speaks during the tribute to Britain's Queen Elizabeth at Britain's Labour Party's annual conference in Liverpool, Britain, September 25, 2022. Starmer, who has led Britain's main opposition party for the past two years, said he would reintroduce the top rate of income tax to 45% after the government abolished the rate in a mini-budget. "I would reverse the decision they made," Labour leader Starmer said. However, Starmer said a Labour government would not reverse the government's decision to cut the basic rate of income tax to 19% from 20%, saying that tax cut would benefit working people. Andy Burnham, the mayor of Greater Manchester, earlier said Labour should oppose all the tax moves outlined by the new government.

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