London Daily

Focus on the big picture.
Thursday, Oct 02, 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
Trump Administration Launches “TrumpRx” Plan to Enable Direct Drug Sales at Deep Discounts
Trump Announces Intention to Impose 100 Percent Tariff on Foreign-Made Films
Altman Says GPT-5 Already Outpaces Him, Warns AI Could Automate 40% of Work
Singapore and Hong Kong Vie to Dominate Asia’s Rising Gold Trade
Trump Organization Teams with Saudi Developer on $1 Billion Trump Plaza in Jeddah
Manhattan Sees Surge in Office-to-Housing Conversions, Highest Since 2008
Switzerland and U.S. Issue Joint Assurance Against Currency Manipulation
Electronic Arts to Be Taken Private in Historic $55 Billion Buyout
Thomas Jacob Sanford Named as Suspect in Deadly Michigan Church Shooting and Arson
Russian Research Vessel 'Yantar' Tracked Mapping Europe’s Subsea Cables, Raising Security Alarms
New York Man Arrested After On-Air Confession to 2017 Parents’ Murders
U.S. Defense Chief Orders Sudden Summit of Hundreds of Generals and Admirals
Global Cruise Industry Posts Dramatic Comeback with 34.6 Million Passengers in 2024
Trump Claims FBI Planted 274 Agents at Capitol Riot, Citing Unverified Reports
India: Internet Suspended in Bareilly Amid Communal Clashes Between Muslims and Hindus
Supreme Court Extends Freeze on Nearly $5 Billion in U.S. Foreign Aid at Trump’s Request
Archaeologists Recover Statues and Temples from 2,000-Year-Old Sunken City off Alexandria
China Deploys 2,000 Workers to Spain to Build Major EV Battery Factory, Raising European Dependence
Speed Takes Over: How Drive-Through Coffee Chains Are Rewriting U.S. Coffee Culture
U.S. Demands Brussels Scrutinize Digital Rules to Prevent Bias Against American Tech
Ringo Starr Champions Enduring Beatles Legacy While Debuting Las Vegas Art Show
Private Equity’s Fundraising Surge Triggers Concern of European Market Shake-Out
Colombian President Petro Vows to Mobilize Volunteers for Gaza and Joins List of Fighters
FBI Removes Agents Who Kneeled at 2020 Protest, Citing Breach of Professional Conduct
Trump Alleges ‘Triple Sabotage’ at United Nations After Escalator and Teleprompter Failures
Shock in France: 5 Years in Prison for Former President Nicolas Sarkozy
Tokyo’s Jimbōchō Named World’s Coolest Neighbourhood for 2025
European Officials Fear Trump May Shift Blame for Ukraine War onto EU
BNP Paribas Abandons Ban on 'Controversial Weapons' Financing Amid Europe’s Defence Push
Typhoon Ragasa Leaves Trail of Destruction Across East Asia Before Making Landfall in China
The Personality Rights Challenge in India’s AI Era
Big Banks Rebuild in Hong Kong as Deal Volume Surges
Italy Considers Freezing Retirement Age at 67 to Avert Scheduled Hike
Italian City to Impose Tax on Visiting Dogs Starting in 2026
Arnault Denounces Proposed Wealth Tax as Threat to French Economy
Study Finds No Safe Level of Alcohol for Dementia Risk
Denmark Investigates Drone Incursion, Does Not Rule Out Russian Involvement
Lilly CEO Warns UK Is ‘Worst Country in Europe’ for Drug Prices, Pulls Back Investment
Nigel Farage Emerges as Central Force in British Politics with Reform UK Surge
Disney Reinstates ‘Jimmy Kimmel Live!’ after Six-Day Suspension over Charlie Kirk Comments
U.S. Prosecutors Move to Break Up Google’s Advertising Monopoly
Nvidia Pledges Up to $100 Billion Investment in OpenAI to Power Massive AI Data Center Build-Out
U.S. Signals ‘Large and Forceful’ Support for Argentina Amid Market Turmoil
Nvidia and Abu Dhabi’s TII Launch First AI-&-Robotics Lab in the Middle East
Vietnam Faces Up to $25 Billion Export Loss as U.S. Tariffs Bite
Europe Signals Stronger Support for Taiwan at Major Taipei Defence Show
Indonesia Court Upholds Military Law Amid Concerns Over Expanded Civilian Role
Larry Ellison, Michael Dell and Rupert Murdoch Join Trump-Backed Bid to Take Over TikTok
Trump and Musk Reunite Publicly for First Time Since Fallout at Kirk Memorial
Vietnam Closes 86 Million Untouched Bank Accounts Over Biometric ID Rules
×