The Brief: The sterling plummeted yet once again to a record low £0.96 (-.0149) as it nears parity with the greenback. On the other hand, 10-year British gilts soared above 4.52%, the highest in 14 years.
Why It Matters: Conservatives called out the Bank of England (BOE) to already step in to stop the bleeding as lawmakers are divided over Chancellor Kwarteng’s mini-budget announcement last Friday. With more tax cuts coming, the market has reacted swiftly over concerns that inflation will continue to spiral.
Finanze® Foresights: The market rout sent shockwaves to investors as they retreated in anticipation of fiscal policies that are likely to further dampen the current economy. But Kwarteng remains unnerved as he somehow expects today’s market reaction to be normal and reminded the public to keep “calm and focus on the long-term strategy.” We’re expecting the BOE to convene this week or the next to announce measures to curb the turmoil. But what would better assuage the market, in our opinion, is for Kwarteng and the BOE to announce plans that would prevent a clash of fiscal and monetary policies and a clear statement on how tax cuts can be better funded.
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