Pound bounces back overnight after a U-turn on Government plan to abolish the top rate of income tax

3 October 2022, 09:57 | Updated: 3 October 2022, 10:50

The pound is going back up after a u-turn on decisions from the chancellor
The pound is going back up after a u-turn on decisions from the chancellor. Picture: Alamy
Fran Way

By Fran Way

The pound has bounced back overnight after a U-turn on Kwasi Kwarteng’s plan to abolish the top rate of income tax.

The chancellor’s decision to axe the 45p tax rate saw the pound fall to an all-time low of 1.03 US dollars.

But last night, sterling surged to 1.13US dollars at one stage, recovering ground lost in the market when the controversial mini-budget was announced.

This morning it pared back some of the gains, trading at 1.12US dollars.

Speaking on LBC's Nick Ferrari at Breakfast, just after the statement was made, the Chancellor was asked three times if he planned any other U-turns but he wouldn't confirm.

"I've said what I've said about the 45p rate and I'm totally focused on delivering the growth plan, on delivering the energy intervention or making sure that the 1p reduction in the basic rate continues.

"And we're totally focused on the growth plan."

The Bank of England was forced to step in last week launching an emergency UK Government bond-buying programme to stave off a "material risk to UK financial stability".

It said it will buy Government bonds - known as gilts - at an "urgent pace" after fears over the Government's economic policies sent the pound tumbling and some pension funds on the brink of collapse.

READ MORE: Kwarteng fails to rule out further U-turns after humiliating 45p tax cut reversal

READ MORE: Another 300 mortgage deals pulled of market and 40% of deals have disappeared since mini-budget

But the FTSE index remained under pressure, falling nearly 1% after opening this morning.

George Lagarias, chief economist at Mazars, said: "The Chancellor's forced U-turn should take some pressure off the pound, for the time being. "Still, the UK has lost some credibility with international markets over the past few years.

"Despite the pound's currency reserve status, British risk assets have a long and difficult way before they return as a staple in the portfolios of international long-term investors."

The pound is also still down by 17% since the start of the year, adding the cost-of-living crisis by making it more expensive to import goods and services.

More Latest News

See more More Latest News

Mr Shannon compared grey squirrels to Hamas

'I favour pest control': DUP MP who called grey squirrels 'the Hamas of the squirrel world' explains bizarre comparison

Palestinian prisoner freed

Mediators aim to extend truce in Gaza as last planned hostage releases begin

Obit Frances Sternhagen

Frances Sternhagen, Tony Award-winning actor, dies at 93

The Cold Weather Payment scheme has been triggered

Cold Weather Payments to be paid out to over 280 postcode areas - are you eligible for cash help?

An entertainment group wants to bring the Sphere to London

Will London get a Vegas Sphere after all? Michael Gove weighs up wading into planning row after Khan blocks plans

Richard Hammond, Jeremy Clarkson and James May attend a screening of 'The Grand Tour' season 3

The Grand Tour set to end as 'Jeremy Clarkson, Richard Hammond and James May leave show'

Jonathan Majors Assault Case

Actor Jonathan Majors in court for start of assault trial

Owen Farrell has stepped back from the national team

England rugby captain Owen Farrell steps back from national team amid mental health struggle, as colleagues rally round

Doorbell footage showed Brianna Ghey leaving home for the last time

Heartbreaking moment Brianna Ghey left home for last time as texts 'show teenagers plot murder'

Ruth Perry took her own life after a critical Ofsted report

Ofsted inspector 'had mocking tone' as he met with emotional headteacher who took own life after critical report

Oher The Blind Side Football

Memphis couple to remove references to Michael Oher being adopted amid legal row

Leasehold reform.

Ministers' embarrassment as bill to ban leaseholds doesn’t actually ban leaseholds

Havering Council has scrapped the Hanukkah plans

Fury as east London council scraps plans to install Hanukkah menorah over fears of 'inflaming community tensions'

Omid Scobie doubles down amid race row insisting he didnt name the royals at the centre of the scandal

Omid Scobie doubles down on race row and insists he didn't name royals at centre of racism claims

Migration Finland Russia Border

Finland closes last crossing point with Russia

Kate fears a Christmas showdown with Harry and Meghan

Kate fears Christmas showdown if Harry and Meghan 'gatecrash' family celebrations