London Daily

Focus on the big picture.
Thursday, Sep 11, 2025

Pound hits highest level since before mini-budget

Pound hits highest level since before mini-budget

The pound has hit its highest level since mid-September, as investors welcomed the appointment of Rishi Sunak as prime minister and the dollar fell.

Sterling surged by 1.9% to $1.149 on Tuesday - the highest it has been since before Liz Truss's mini-budget.

Government borrowing costs also fell back to where they were last month, in a boost for Mr Sunak who took over on Tuesday.

Financial markets have been rattled by fears over the economy in recent weeks.

In a speech today Mr Sunak warned the country faced a "profound economic crisis" with "difficult decisions" ahead.

Experts said the pound's strength was partly a "relief rally" after Mr Sunak was appointed, but also due to the dollar's weakness.

The US currency dropped on Tuesday after data showed slowing US house price growth and a decline in US consumer confidence.

"The dollar is losing ground across the board today," said Jeremy Stretch, head of FX Strategy at investment bank CIBC.

"But there's no doubt there's a relief rally here in terms of apparent stability in the macro-economic picture after Sunak came in."

Last month, sterling plunged to a record low against the dollar and government borrowing costs rose sharply in the aftermath of former Prime Minister Liz Truss's mini-budget.

Investors were spooked after then-Chancellor Kwasi Kwarteng promised major tax cuts without saying how they would be paid for - something Mr Sunak warned about during this summer's Tory leadership contest.

Mr Sunak, a former hedge fund manager, is seen as a safer pair of hands by investors and has pledged to fix "mistakes" made under Liz Truss's leadership.

New Chancellor Jeremy Hunt - who reversed almost all of Ms Truss's tax cuts - will keep his job in the new cabinet and is scheduled to set out his economic plan for tax and spending on 31 October.

On Monday Shevaun Haviland, director general of the British Chambers of Commerce, cautioned that the country "cannot afford to see any more flip-flopping on policies".

"The political and economic uncertainty of the past few months has been hugely damaging to British business confidence and must now come to an end," she said.

Borrowing costs fall


On Tuesday government borrowing costs fell back to levels seen just before the mini-budget, with the interest rate - or yield - on bonds due to be repaid in 30 years' time dropping to 3.6%.

Meanwhile, the yield on bonds due to be repaid in five years' time, which underpins the cost of new five-year fixed rate mortgages, fell to 3.7%.

Yields are still well above rates seen this summer but the fall will come as a relief to the government, whose September borrowing figures were the second highest on record.

Mortgage-holders will also hope it feeds through to the mortgage market, where rates hit 14-year highs after the recent turmoil.

On Monday, the deputy governor for markets and banking at the Bank of England, Sir Dave Ramsden, said recent falls in government borrowing costs had shown that "credibility is returning to British economic policy".

Yet despite the improving picture, experts warned Mr Sunak faced tough times ahead.

"The former chancellor has a mammoth task ahead of him as he tackles the mounting economic crisis facing the UK and his warring political party," said CityIndex strategist Fiona Cincotta.

Jordan Rochester, a strategist at Nomura, said every new leader tended to get a "honeymoon period".

"Liz Truss's didn't last very long. The question will be how long does this honeymoon period last for Rishi Sunak?"

Newsletter

Related Articles

0:00
0:00
Close
ChatGPT CEO signals policy to alert authorities over suicidal youth after teen’s death
The British legal mafia hit back: Banksy mural of judge beating protester is scrubbed from London court
Surpassing Musk: Larry Ellison becomes the richest man in the world
Embarrassment for Starmer: He fired the ambassador photographed on Epstein’s 'pedophile island'
Manhunt after 'skilled sniper' shot Charlie Kirk. Footage: Suspect running on rooftop during panic
Effective Protest Results: Nepal’s Prime Minister Resigns as Youth-Led Unrest Shakes the Nation
Qatari prime minister says Netanyahu ‘killed any hope’ for Israeli hostages
King Charles and Prince Harry Share First In-Person Moment in 19 Months
Starmer Establishes Economic ‘Budget Board’ to Centralise Policy and Rebuild Business Trust
France Erupts in Mass ‘Block Everything’ Protests on New PM’s First Day
Poland Shoots Down Russian Drones in Airspace Violation During Ukraine Attack
Brazilian police say ex-President Bolsonaro had planned to flee to Argentina seeking asylum
Trinidad Leader Applauds U.S. Naval Strike and Advocates Forceful Action Against Traffickers
Kim Jong Un Oversees Final Test of New High-Thrust Solid-Fuel Rocket Engine
Apple Introduces Ultra-Thin iPhone Air, Enhanced 17 Series and New Health-Focused Wearables
Macron Appoints Sébastien Lecornu as Prime Minister Amid Budget Crisis and Political Turmoil
Supreme Court temporarily allows Trump to pause billions in foreign aid
Charlie Sheen says his father, Martin Sheen, turned him in to the police: 'The greatest betrayal possible'
Vatican hosts first Catholic LGBTQ pilgrimage
Apple Unveils iPhone 17 Series, iPhone Air, Apple Watch 11 and More at 'Awe Dropping' Event
Pig Heads Left Outside Multiple Paris Mosques in Outrage-Inducing Acts
Nvidia’s ‘Wow’ Factor Is Fading. The AI chip giant used to beat Wall Street expectations for earnings by a substantial margin. That trajectory is coming down to earth.
France joins Eurozone’s ‘periphery’ as turmoil deepens, say investors
On the Anniversary of Queen Elizabeth’s Death: Prince Harry Returns to Britain
France Faces New Political Crisis, again, as Prime Minister Bayrou Pushed Out
Murdoch Family Finalises $3.3 Billion Succession Pact, Ensuring Eldest Son’s Leadership
Big Oil Slashes Jobs and Investments Amid Prolonged Low Crude Prices
Court Staff Cover Up Banksy Image of Judge Beating a Protester
Social Media Access Curtailed in Turkey After CHP Calls for Rallies Following Police Blockade of Istanbul Headquarters
Nayib Bukele Points Out Belgian Hypocrisy as Brussels Considers Sending Army into the Streets
Elon Musk Poised to Become First Trillionaire Under Ambitious Tesla Pay Plan
France, at an Impasse, Heads Toward Another Government Collapse
Burning the Minister’s House Helped Protesters to Win Justice: Prabowo Fires Finance Minister in Wake of Indonesia Protests
Brazil Braces for Fallout from Bolsonaro Trial by corrupted judge
The Country That Got Too Rich? Public Spending Dominates Norway Election
Nearly 40 Years Later: Nike Changes the Legendary Slogan Just Do It
Generations Born After 1939 Unlikely to Reach Age One Hundred, New Study Finds
End to a four-year manhunt in New Zealand: the father who abducted his children to the forests was killed, the three siblings were found
Germany Suspends Debt Rules, Funnels €500 Billion Toward Military and Proxy War Strategy
EU Prepares for War
BMW Eyes Growth in China with New All‑Electric Neue Klasse Lineup
Trump Threatens Retaliatory Tariffs After EU Imposes €2.95 Billion Fine on Google
Tesla Board Proposes Unprecedented One-Trillion-Dollar Performance Package for Elon Musk
US Justice Department Launches Criminal Mortgage-Fraud Probe into Federal Reserve Governor Lisa Cook
Escalating Drug Trafficking and Violence in Latin America: A Growing Crisis
US and Taiwanese Defence Officials Held Secret Talks in Alaska
Report: Secret SEAL Team 6 Mission in North Korea Ordered by Trump in 2019 Ended in Failure
Gold Could Reach Nearly $5,000 if Fed Independence Is Undermined, Goldman Sachs Warns
Uruguay, Colombia and Paraguay Secure Places at 2026 World Cup
Florida Murder Case: The Adelson Family, the Killing of Dan Markel, and the Trial of Donna Adelson
×