London Daily

Focus on the big picture.
Friday, Jun 20, 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
16 Billion Login Credentials Leaked in Unprecedented Cybersecurity Breach
Senate hearing on who was 'really running' Biden White House kicks off
Iranian Military Officers Reportedly Seek Contact with Reza Pahlavi, Signal Intent to Defect
FBI and Senate Investigate Allegations of Chinese Plot to Influence the 2020 Election in Biden’s Favor Using Fake U.S. Driver’s Licenses
Vietnam Emerges as Luxury Yacht Destination for Ultra‑Rich
Plans to Sell Dutch Embassy in Bangkok Face Local Opposition
China's Iranian Oil Imports Face Disruption Amid Escalating Middle East Tensions
Trump's $5 Million 'Trump Card' Visa Program Draws Nearly 70,000 Applicants
DGCA Finds No Major Safety Concerns in Air India's Boeing 787 Fleet
Airlines Reroute Flights Amid Expanding Middle East Conflict Zones
Elon Musk's xAI Seeks $9.3 Billion in Funding Amid AI Expansion
Trump Demands Iran's Unconditional Surrender Amid Escalating Conflict
Israeli Airstrike Targets Iranian State TV in Central Tehran
President Trump is leaving the G7 summit early and has ordered the National Security Council to the Situation Room
Taiwan Imposes Export Ban on Chips to Huawei and SMIC
Israel has just announced plans to strike Tehran again, and in response, Trump has urged people to evacuate
Netanyahu Signals Potential Regime Change in Iran
Juncker Criticizes EU Inaction on Trump Tariffs
EU Proposes Ban on New Russian Gas Contracts
Analysts Warn Iran May Resort to Unconventional Warfare
Iranian Regime Faces Existential Threat Amid Conflict
Energy Infrastructure Becomes War Zone in Middle East
UK Home Secretary Apologizes Over Child Grooming Failures
Trump Organization Launches 5G Mobile Network and Golden Handset
Towcester Hosts 2025 English Greyhound Derby Amid Industry Scrutiny
Gary Oldman and David Beckham Knighted in King's Birthday Honours
Over 30,000 Lightning Strikes Recorded Across UK During Overnight Storms
Princess of Wales Returns to Public Duties at Trooping the Colour
Red Arrows Use Sustainable Fuel in Historic Trooping the Colour Flypast
Former Welsh First Minister Addresses Unionist Concerns Over Irish Language
Iran Signals Openness to Nuclear Negotiations Amid Ongoing Regional Tensions
France Bars Israeli Arms Companies from Paris Defense Expo
King Charles Leads Tribute to Air India Crash Victims at Trooping the Colour
Jack Pitchford Embarks on 200-Mile Walk to Support Stem Cell Charity
Surrey Hikers Take on Challenge of Climbing 11 Peaks in a Single Day
UK Deploys RAF Jets to Middle East Amid Israel-Iran Tensions
Two Skydivers Die in 'Tragic Accident' at Devon Airfield
Sainsbury's and Morrisons Accused of Displaying Prohibited Tobacco Ads
UK Launches National Inquiry into Grooming Gangs
Families Seek Closure After Air India Crash
Gold Emerges as Global Safe Haven Amid Uncertainty
Trump Reports $57 Million Earnings from Crypto Venture
Trump's Military Parade Sparks Concerns Over Authoritarianism
Nationwide 'No Kings' Protests Challenge Trump's Leadership
UK Deploys Jets to Middle East Amid Rising Tensions
Trump's Anti-War Stance Tested Amid Israel-Iran Conflict
Germany Holds First Veterans Celebration Since WWII
U.S. Health Secretary Dismisses CDC Vaccine Advisory Committee
Minnesota Lawmaker Melissa Hortman and Husband Killed in Targeted Attack; Senator John Hoffman and Wife Injured
Exiled Iranian Prince Reza Pahlavi Urges Overthrow of Khamenei Regime
×