Sterling rallies to fresh six-week high; UK’s autumn statement delayed to 17 November – business live
Viraj Patel, senior currency and macro global strategist at Vanda Research, was more sceptical.
*UK GOVERNMENT DELAYS FISCAL STATEMENT TO NOVEMBER 17
This doesn’t change anything. Probably buys Sunak & Hunt time to get a proper plan together that restores fiscal credibility. But this makes the BoE’s job a lot harder next week. They may choose caution over aggression $GBP
— Viraj Patel (@VPatelFX) October 26, 2022
Ben Zanako, economist at the Institute for Fiscal Studies, said:
A delay is sensible. There’s a lot riding on this, so important to get the details right. But the challenge remains the same: find a way to somehow reconcile 2019 manifesto public service objectives (which Sunak has recommitted to) with likely cuts to public spending. Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown, said about the postponed of the government’s fiscal plans:
The two-week delay of plans to reveal detail of the UK government’s spending plans on Halloween hasn’t caused investors to take fright, with the markets cutting prime minister Rishi Sunak some slack, given that he’s just a day into the new job. The pound has remained above $1.15, retreating only a little from the mornings highs, but sterling is still up overall. UK borrowing costs remain significantly lower with 10-year gilt yields hovering around 3.6%. Rishi Sunak’s new cast for the cabinet, including the continuity chancellor Jeremy Hunt, was aimed at demonstrating to the markets that financial stability is top priority for the government and for now it doing the trick. His choice of words in his maiden speech were also reassuring, with a promise to set limits on borrowing. Early rewards have come with the sharp rise in the pound, back up to six-week highs earlier today, but sterling was also given a leg-up by a slightly weaker dollar, amid expectations that the Fed won’t go so hard and fast with rate rises with given the record slowdown in house prices. Investors are mindful that it was the unnecessary rush to announce big tax cuts which caused such tumultuous times for the Truss administration and what they crave now is caution and stability. The premium slammed on UK assets by reckless policies of his predecessor appears to be slowly lifting, but hefty challenges for team Sunak remain, as the economy heads into recession and the productivity puzzle remains as cryptic as ever to solve. The hunt for a new chair of the Treasury committee is underway. It comes after the Tory MP Mel Stride, a staunch supporter of Rishi Sunak, was appointed as work and pensions secretary in Sunak’s new cabinet. The position comes with the power to haul in ministers, central bank officials, regulators, and City executives in front of MPs to answer questions on the economy and issues affecting banking and financial services. The committee is currently scrutinising a number of issues including Russian sanctions, venture capital markets, risks surrounding cryptocurrencies, as well as the wider impacts of the pending Financial Services and Markets Bill. Stride’s successor will have an opportunity to ratchet up the pressure on City officials, who some believe have been given an easier run than under his predecessors, which have included now-Baroness Nicky Morgan and the former Competition and Markets Authority boss, Lord Andrew Tyrie. The chairing role is only open to MPs from the Tory party which holds a majority in the House of Commons, and hopefuls will have to secure 15 signatures from their own party to qualify before nominations close on 8 November. The results will be announced the same day, unless there are multiple candidates, in which case it will go to a vote on 9 November. Over in the US, the average interest rate on the most popular US home loan has risen to its highest level since 2001. Data from the Mortgage Bankers Association showed the average rate on a 30-year fixed-rate mortgage rose by 22 basis points to 7.16% for the week ended 21 October. Mortgage applications growth is the slowest since 1997. Mortgage rates have more than doubled since the start of the year, as the Federal Reserve hiked interest rates aggressively to try and tame high inflation. The central bank is expected to raise borrowing costs by a further 75 basis points at its next meeting on 1-2 November. The yield on the 10-year Treasury bond acts as a benchmark for mortgage rates. It fell slightly to 4.05% today. Markets will no doubt be reassured by the announcement that the government’s autumn statement – a full budget – will be published alongside full forecasts from the Office for Budget Responsibility, the fiscal watchdog. The lack of an independent assessment by the OBR was one of the main reasons why Kwasi Kwarteng’s mini-budget of unfunded tax cuts on 23 November caused market turmoil.
Ed Conway, Sky’s economics editor, has tweeted:
As I said on @skynews a moment ago, so far markets seem sanguine about the decision to delay the fiscal statement. No panic. Normally you’d take that for granted but not after the past few weeks… pic.twitter.com/tTGjKxO7L3
— Ed Conway (@EdConwaySky) October 26, 2022
As I wrote last night, part of the rationale was that since the market stress has now diminished there was no longer any reason to get the fiscal statement in before the BoE decision next Thurs. https://t.co/YB6wOC9qN2 — Ed Conway (@EdConwaySky) October 26, 2022
