Sterling nudges lower but still near multi-year highs, looking past UK politics
Investors by and large looked through political drama in Britain where Prime Minister Kier Starmer suffered the largest parliamentary rebellion of his premiership even as he was forced to back down on key parts of a benefit-cutting package.
Markets this week were more focused on hints from Bank of England governor Andrew Bailey on Tuesday that the central bank could change the BoE's quantitative tightening process - the pace of which, analysts say, has been weighing on longer dated government bonds known as gilts.
"The gilt market did not react negatively to the news from the Commons, at least partly thanks to Bank of England Governor Andrew Bailey hinting at a potentially slowing quantitative tightening to give some relief to back-end liquidity. That may have helped shield sterling, too," said Francesco Pesole, currency analyst at ING, in a note.
Sterling was last down 0.35% on the dollar, largely moving in line with peers, as the dollar's recent decline paused for breath.
The pound hit $1.3787 on Tuesday, its highest since autumn 2021. Other European currencies such as the euro and Swiss franc are also at their strongest in years.
Sterling was also a touch weaker on the euro, which was up 0.15% at 85.98 pence, an over two-month high.
There is little British economic data expected for the rest of the day, though policy maker Alan Taylor will speak at the ECB's central bank conference at Sintra, Portugal.
Taylor voted for a rate cut at the central bank's last meeting in June, when the rate-setting monetary policy committee voted to keep rates steady. Market pricing indicates a good chance of a BoE rate cut at their meeting next month, though it is not yet fully priced in.
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Hurrah for the Gen Z youngsters who are taking up drinking
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The Independent
37 minutes ago
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Rachel Reeves says ‘I was upset but today's a new day' after Commons tears
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The Independent
37 minutes ago
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Every Labour U-turn after PM reverses welfare cuts
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It stated: 'Labour will not increase taxes on working people, which is why we will not increase National Insurance, the basic, higher, or additional rates of Income Tax, or VAT.' But, Sir Keir and Chancellor Ms Reeves used the ambiguity around whether they meant employer or employee national insurance contributions to steamroll the pledge at Labour's first Budget in power. The pair argue that they only promised to keep employee contributions frozen and instead landed firms with a 2 per cent increase to employer national insurance contributions. Tractor tax Farmers have also said they feel betrayed by the PM, after a 2023 National Farmers Union (NFU) speech in which he promised to have 'a new relationship with the countryside and farmers'. Sir Keir claimed to be concerned that 'each day brings a new existential risk to British farming. He added: 'Losing a farm is not like losing any other business, it can't come back.' Going even further, then shadow environment secretary Steve Reed said it was 'desperate nonsense' to suggest he would scrap tax breaks for farmers, just weeks before the July 4 poll. But, in another hugely unpopular Budget bombshell, Sir Keir slashed agricultural property relief, meaning previously exempt farms will be his with a 20 per cent levy on farming assets worth more than £1m. Critics have said it will see family farmers forced to sell up, ripping the heart out of countryside communities. And other times the PM has rowed back on his words... Two-child benefit cap Promising in 2020 to create a social security system fit for the 21st century, Sir Keir said: 'We must scrap the inhuman Work Capability Assessments and private provision of disability assessments... scrap punitive sanctions, two-child limit and benefits cap.' But before the election, Sir Keir said Labour was 'not changing' the Tory policy if Labour were to win power. He has stuck to his guns, even suspending seven Labour MPs for rebelling against his King's Speech in a bid to have the policy scrapped. And now, it looks like the prime minister is gearing up to row back on the position. While nothing has been announced, the prime minister is privately said to be in favour of lifting the cap. He has refused to commit to anything until the child poverty strategy is published in the autumn but has insisted he is 'absolutely determined' to 'drive down' child poverty and has repeatedly sidestepped questions on the issue when pressed on it. £28bn green investment pledge As shadow chancellor, Rachel Reeves announced the party's plans for an extra £28bn a year in green investment at Labour's conference in September 2021. But before the election, Sir Keir ditched the £28bn a year target and said instead that he would spend a far smaller sum on Great British Energy, a national wealth fund for clean investment and pledges on energy efficiency. Bankers' bonuses Strict regulations on bonuses, which limit annual payouts to twice a banker's salary, were introduced by the EU in 2014 in a bid to avoid excessive risk-taking after the 2008 financial crisis. Former prime minister Liz Truss and chancellor Kwasi Kwarteng scrapped the cap in 2022, in a bid to encourage more investment in the UK. Sir Keir had previously vowed to reinstate the cap, saying in 2022 that lifting it 'shows the Tories are absolutely tone deaf to what so many people are going through'. But in another major U-turn, Ms Reeves announced before the election that the party 'does not have any intention of bringing that back'.
