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Pound hikes as the UK govt take U-turn to cut highest income tax rate

Author : Saipriya Iyer | Published Date : 2022-10-04 

Pound hikes as the UK govt take U-turn to cut highest income tax rate

The pound reportedly rose on news that the UK would forgo plans to reduce the highest rate of income tax, one of the controversial parts of a package of financial reforms that drove sterling and British government bonds into a tailspin last month.

The U-turn follows a crisis of investor confidence brought on by the government's fiscal policies, which caused markets to be so shaken that the Bank of England (BoE) was forced to step in and launch a £65 billion ($72.8 billion) plan to buy bonds.

Initial news reports of the U-turn resulted in the pound rising as much as 1% to $1.128, the pound's highest possible level since the day before Chancellor Kwasi Kwarteng launched the growth plan, which reduced taxes and regulations and was financed by significant government borrowing.

Later, after reversing some of its gains, the pound last rose by 0.6% to $1.12305.

The pound increased in value relative to the Singapore dollar by as much as 0.6%, to $1.6166, before settling at $1.6065, up 0.17% from the previous day's closing.

In the days following the mini-budget last week, the pound hit a record low at $1.03270 against the US dollar.

Analysts predicted the action, which reverses £2 billion ($2.24 billion) of the anticipated £45 billion ($51.17 billion) in tax cuts, will boost the pound, but they cautioned that additional government intervention would be required.

According to MUFG currency analyst Lee Hardman, whether it’s rolling back more tax cuts or pledges to slash spending, this probably won't be enough to restore trust. Markets will continue to demand their due compensation.

Meanwhile, Jan von Gerich, chief analyst at Nordea stated that it would certainly take the markets some time to get the message, but it was a start in the right direction.

Despite statements from Japanese Finance Minister Shunichi Suzuki that the government will take decisive actions to prevent significant currency fluctuations, the yen also dropped as low as 145.4, compared to the US dollar.

Source credit: https://www.straitstimes.com/business/economy/pound-jumps-as-uk-government-u-turns-on-cut-to-top-tax-rate

About Author

Saipriya Iyer . .

Saipriya Iyer

Saipriya Iyer presently works as a content developer for fractovia.org. Having dabbled with the domain of content creation for nearly half a decade, she now boasts of an enviable portfolio, holding substantial experience in penning down pieces related to technology, finance, and a wide spectrum of other industry verticals. A qualified computer engineering graduate from the University of Pune, Saipriya can often be found leveraging her knowledge of software technology and electronics in her write-ups. She can be contacted at- [email protected] | https://twitter.com/saipriya_i

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