The pound pared its losses against the dollar, which at one point saw it hit a record low, amid speculation the Bank of England will respond to the sharp moves in markets in the wake of the UK government’s plans to cut taxes and ramp up borrowing.
Sterling was trading around US$1.08 as of 3:20 p.m. London, down 0.5 per cent on the day, after earlier plunging almost 5 per cent to US$1.0350. Pressure on government bonds also eased, with five-year gilt yields trading 39 basis points higher on the day at 4.46 per cent, after climbing to as high as 4.61 per cent earlier, the highest since 2008.
So far, there’s been silence from the government and the Bank of England. The BOE has yet to decide whether to comment on conditions, and is watching the market closely, according to a person with knowledge of the situation. Sky News reported that the central bank is expected to make a statement Monday.
Given that Prime Minister Liz Truss appears to be throwing out traditional economic orthodoxy, it may be the BOE is concerned about its own place in this new world.
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