The wild market swings are a response to new fiscal measures, including sweeping tax cuts that investors fear will fuel inflation and increase borrowing at a time of rapidly rising interest rates.
The pound pared its losses against the dollar, which at one point saw it hit a record low, amid speculation the Bank of England will respond to the sharp moves in markets in the wake of the UK government’s plans to cut taxes and ramp up borrowing.
Sterling was trading around US$1.08 as of 3:20 p.m. London, down 0.5% on the day, after earlier plunging almost 5% to US$1.0350. Pressure on government bonds also eased, with five-year gilt yields trading 39 basis points higher on the day at 4.46%, after climbing to as high as 4.61% earlier, the highest since 2008.
