Sterling rises with UK finance minister set to unveil spending plans

Sterling rose Monday as Britain’s new finance minister prepared to announce new tax and spending measures aimed at calming markets after a botched debt-fuelled budget by his predecessor sent shivers through trading floors, AFP reported.
Jeremy Hunt was put in place on Friday after Prime Minister Liz Truss sacked Kwasi Kwarteng as she battles to save her political career just weeks after taking the keys to Downing Street.
Hunt is tipped to tear up the previous plans and warned at the weekend of tax hikes as he dramatically reversed course on right-wing Truss’ radical programme.
“It does indicate that they are moving back to some degree of fiscal probity and employing a slightly more prudent fiscal outlook,” said Peter Kinsella, of Union Bancaire Privee UBP SA.
The pound held above $1.12, having sunk Friday owing to the uncertainty in Westminster, while a news conference by Truss did very little to reassure nervous investors.
Bonds also rallied on the first day without the Bank of England support put in place in response to turmoil caused by Kwarteng’s mini-budget.
“There is no question that recent events have shattered confidence in the… current government, and trust once foregone is usually very difficult to get back,” said CMC Markets’ Michael Hewson.
“The wider question now is what happens next with respect to any new budget, and whether new Chancellor Jeremy Hunt can stabilise the ship at a time when global interest rates are rising anyway.”
The calm also lifted equities, with London in positive territory in the morning. There were also gains in Paris and Frankfurt.
Asia started the week in mixed fashion as Friday’s rally petered out.
The latest strong US inflation reading ramped up bets that the Federal Reserve will hike borrowing costs by 75 basis points twice more before the end of the year, stoking concerns the world’s top economy will flip into a recession.
All three main indexes on Wall Street finished sharply lower Friday.