Pound rallies as UK rips up budget

The pound jumped more than one per cent against the dollar Monday as Britain’s fourth finance minister in as many months sensationally ripped up a tax-cutting budget that had spooked markets.

Chancellor of the Exchequer Jeremy Hunt tore up fiscal policy unveiled by the new government of Prime Minister Liz Truss last month.

She is battling to stay in power after dramatically sacking Hunt’s predecessor Kwasi Kwarteng on Friday.

Truss and Kwarteng had announced tax cuts, funded by debt -- causing the pound to hit a record low against the dollar and UK government bond yields to soar.

‘Government can’t control markets’

“No government can control markets but every government can give certainty about the sustainability of public finances,” Hunt said in a televised address that demolished the maligned budget.

However, the pound rallied and yields on UK government bonds, or gilts, slid on Monday’s fiscal policy U-turns.

“The markets are responding positively to the new chancellor’s plans to reverse almost all of the tax cuts announced by his predecessor,” noted Victoria Scholar, head of investment at Interactive Investor.

“Jeremy Hunt’s focus on reassuring the markets and reinstating confidence appears to have worked so far with gilt yields trading lower and sterling pushing higher.”