Pound recovers and is back to where it was before the Quasi Kwarteng shock. The British currency is up about 8% from a record low hit on Monday. The low of $1.0350 was set after the announcement of an extensive tax cut that unleashed a roller coaster week. On the same day, it fell 3.6% and then fell another 4.7% on Monday. In the first hour of Asia this Friday has reached 1.1168 dollars.
The pound’s recovery is not due to the improving UK outlook, Westpac said. “This is a reminder that currencies are driven by a variety of factors. Sean Callow, strategist at Westpac Banking Corp. in Sydney. “The pound has at least much stronger yield support now. Loose fiscal policy is often supportive of currencies to the extent that it can force tighter monetary policy.”
The central bank stepped in on Wednesday, promising purchases of longer-maturity bonds indefinitely, after a sell-off threatened to send gold markets into a downward spiral and trigger a pension fund crisis.
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