The pound fell against the US dollar on Friday after Chancellor Kwasi Kwarteng was sacked by Prime Minister Liz Truss amid an ongoing uprising over the couple’s disastrous ‘mini budget’.
Mr Kwarteng was told his services were no longer needed as Ms Truss tried to regain her powers ahead of a reversal of part of the financial plan outlined by the chancellor just three weeks ago.
The British currency traded 1.4% below the dollar at some point after Kwarteng’s dismissal, when 1 pound could buy $1.1169.
Earlier in the day, Mr. Kwarteng hurried back to the UK from Washington, DC, where he attended a meeting of leaders of the International Monetary Fund, whose managing director criticized his tax cut program.
In a letter to Ms Truss posted on social media, Mr Kwarteng said: “You have asked me to stand aside as your Chancellor. I agreed”.
He said that her “vision of optimism, growth and change was right” and promised to support her from the back rows. Ms Truss has appointed former Minister of Health and Foreign Affairs Jeremy Hunt as the new Chancellor.
The selection of Mr Hunt, a prominent supporter of her rival Rishi Sunak in the Tory leadership race, will be seen as an attempt to restore stability after weeks of turmoil caused by Mr Kwarteng’s mini-budget.
The ousted chancellor’s financial report to the House of Commons on 23 September sent markets into turmoil, prompting the Bank of England to launch a £65bn package to buy government bonds as some pension funds teetered on the brink of collapse.
It also led to further increases in interest rates and higher mortgage costs.
The market turmoil also sparked an uprising among Conservative supporters who urged the prime minister to change course.
At a Friday afternoon press conference, Ms. Truss announced that corporate tax would rise from 19% to 25% next year, drastically changing her economic plans.
Insisting that she “intends to deliver” on her campaign promises, Ms Truss refused to apologize for the political upheaval that followed her policies.
Asked if she would apologize to her party, Ms Truss told Downing Street reporters: “I am determined to do what I set out to do when I campaigned for the leadership of the party.
“We need a fast-growing economy, but we must recognize that we as a country are facing very difficult challenges.
“And it was right, in the national interest, that I made the decisions that I made today to restore this economic stability so that we can do something in the first place by helping people get through this winter and next winter with their energy bills, but also confident that our country is on a long-term basis for sustainable economic growth.”
The pound fell after Ms. Truss confirmed that the government would change its policy and cancel the planned income tax increase.
The pound cut some of its early losses shortly before the prime minister’s speech but then pulled back, indicating that traders believe there is still more action to be taken.
The pound fell 1.2% to 1.119 against the US dollar after the update.
Meanwhile, UK government bond yields, which have come under heavy pressure in recent weeks, also rose to 4.5%, almost back to Friday’s market open.
Credit: www.independent.co.uk /