Sterling heads for weekly loss as fiscal concerns loom
The pound was flat and last fetched $1.36, while against the euro it inched 0.1% lower and was last at 86.26 pence. Gilt yields were broadly steady in late morning trading.
However, on a weekly basis, cable was down 0.4% against the greenback, while it had fallen about 1% against the euro, marking its biggest one-week drop against the currency since U.S. tariffs on world economies took effect in early April.
UK stocks, bonds and cable witnessed a selloff earlier in the week, after the government's welfare reforms were not well received by ruling Labour Party members and stirred speculation about the future of finance minister Rachel Reeves.
Some analysts even drew parallels between this week's market reaction and the rout during former Prime Minister Liz Truss' premiership in 2022.
With the Keir Starmer-led government completing one year in power, uncertainties prevail over the options it has to balance public accounts.
Sterling steadies after selloff, fiscal worries prevail
'There is speculation that given the difficulties the government has faced in finding savings from welfare budgets, tax rises are likely in the Autumn Budget,' said Susannah Streeter, head of money and markets at Hargreaves Lansdown.
'Bets are rising that the Bank of England will cut interest rates more quickly with a reduction in August increasingly on the cards. So, that's kept a bit more downwards pressure on sterling.'
Traders expect the Bank of England to lower borrowing costs by 25 basis points next in September and are anticipating another interest rate cut by the same amount before the year ends, data compiled by LSEG showed.
Further, top ratings agency S&P said the inability of Britain's government to make modest cuts to welfare spending this week underscores that it has very limited budgetary room to manoeuvre.
Despite the week's developments, the pound is at a near four-year high against the dollar and is up about 9% so far this year, having benefited from broader dollar weakness and as a U.S.-UK trade deal offered some relief on the tariff front.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Business Recorder
6 hours ago
- Business Recorder
Sterling heads for weekly loss as fiscal concerns loom
Sterling was poised for a weekly loss on Friday, marking a lacklustre end to a week that saw fiscal and political uncertainties rattle investor appetite for UK assets. The pound was flat and last fetched $1.36, while against the euro it inched 0.1% lower and was last at 86.26 pence. Gilt yields were broadly steady in late morning trading. However, on a weekly basis, cable was down 0.4% against the greenback, while it had fallen about 1% against the euro, marking its biggest one-week drop against the currency since U.S. tariffs on world economies took effect in early April. UK stocks, bonds and cable witnessed a selloff earlier in the week, after the government's welfare reforms were not well received by ruling Labour Party members and stirred speculation about the future of finance minister Rachel Reeves. Some analysts even drew parallels between this week's market reaction and the rout during former Prime Minister Liz Truss' premiership in 2022. With the Keir Starmer-led government completing one year in power, uncertainties prevail over the options it has to balance public accounts. Sterling steadies after selloff, fiscal worries prevail 'There is speculation that given the difficulties the government has faced in finding savings from welfare budgets, tax rises are likely in the Autumn Budget,' said Susannah Streeter, head of money and markets at Hargreaves Lansdown. 'Bets are rising that the Bank of England will cut interest rates more quickly with a reduction in August increasingly on the cards. So, that's kept a bit more downwards pressure on sterling.' Traders expect the Bank of England to lower borrowing costs by 25 basis points next in September and are anticipating another interest rate cut by the same amount before the year ends, data compiled by LSEG showed. Further, top ratings agency S&P said the inability of Britain's government to make modest cuts to welfare spending this week underscores that it has very limited budgetary room to manoeuvre. Despite the week's developments, the pound is at a near four-year high against the dollar and is up about 9% so far this year, having benefited from broader dollar weakness and as a U.S.-UK trade deal offered some relief on the tariff front.
Business Recorder
12 hours ago
- Business Recorder
UK's Reeves to announce review of workplace pensions contributions, Financial Times reports
British Finance Minister Rachel Reeves is expected to announce a shake-up of the UK pension system in her Mansion House speech on July 15, including plans to look at the amount companies and their staff set aside for retirement, the Financial Times reported on Friday. Reeves plans to establish a commission to conduct a long-anticipated review of pension adequacy, examining auto-enrolment rates, the state pension, and retirement savings among the self-employed, the report added, citing executives familiar with her plans. UK's Reeves considers reversing a decision to charge inheritance tax on 'non-dom' global assets, FT reports The Treasury did not immediately respond to a Reuters request for comment. In July last year, Britain's government launched a review of the pensions system to look at ways to shift more investment into productive assets with the aim of boosting economic growth and improving retirement incomes.
Business Recorder
a day ago
- Business Recorder
UK stocks stabilise a day after selloff on fiscal concerns
London's main stock indexes closed higher on Thursday as political tensions appeared to ease after finance minister Rachel Reeves said she's 'totally' up for the job, drawing support from Prime Minister Keir Starmer. The blue-chip FTSE 100 was up 0.6%, while the midcap index gained 1.2%. Main FTSE stock indexes had declined on Wednesday in a market-wide selloff after Reeves appeared tearful in parliament following a series of U-turns on welfare reforms that blew a hole in her budget plans. 'Some worries remain about the government being backed into a corner and losing its grip on public finances,' said Susannah Streeter, head of money and markets at Hargreaves Lansdown. 'Investors may still be on alert to fresh opposition to government plans to trim spending, to try and abide by its fiscal rules and keep bond markets onside.' Meanwhile across the Atlantic, traders pared bets on a July rate cut by the U.S. Federal Reserve after data showed the country's labour market remained resilient in June. In Britain, retail stocks topped the sectoral chart with a 2.2% gain after electricals retailer Currys beat profit estimates on strong demand for mobile and computing products. Currys shares jumped 7.1%, while peer AO World was up 1%. However, Watches of Switzerland fell 8% and was among the top midcap decliners after the luxury retailer warned of a margin hit due to tariff pressures. Pharmaceutical stocks were the sectoral losers, declining 1.3%. AstraZeneca fell 1.8% and GSK lost 1.1%. On the macro-economic front, data from the S&P UK services PMI showed that British services sector activity expanded at the fastest rate in almost a year, while the prices charged rose at the slowest pace in nearly four years. The Bank of England is closely assessing service sector prices to gauge inflation pressure. Investors widely expect a rate cut in August.
