Breaking News
Investing Pro 0
NEW! Get Actionable Insights with InvestingPro+ Try 7 Days Free

Sterling heads for second weekly gain, aided by UK support package

Economy May 27, 2022 15:15
Saved. See Saved Items.
This article has already been saved in your Saved Items
© Reuters. FILE PHOTO: Pound Sterling notes and change are seen inside a cash resgister in a coffee shop in Manchester, Britain, Septem,ber 21, 2018. REUTERS/Phil Noble

LONDON (Reuters) -Britain's pound headed for a second weekly rise and was close to a one-month high on Friday, helped by a large government spending package to support households that economists said should support the economy in the short term.

The government on Thursday announced a 25% windfall tax on oil and gas producers' profits to help fund a 15 billion pound ($18.9 billion) package of support for households struggling to meet soaring energy bills.

Reaction on currency markets was muted, but analysts said signs of government support, which was mostly targeted at lower-income households, could lift sentiment towards sterling which has rebounded this week versus the dollar after falling to a two-year low earlier this month.

Sterling's rebound has also been aided by a broad reversal in the U.S. currency, which slipped again on Friday. The UK currency's performance against the euro has been much weaker in recent sessions.

The pound was last up 0.2% at $1.2634 after earlier reaching $1.2666. It is on course for a more than 1% gain this week, which followed a 2% rise last week.

Versus the euro, sterling was 0.1% stronger at 84.99 pence but that followed a fall on Thursday.

"If the passthrough of looser UK fiscal policy ... is marginally tighter monetary policy - as a number of forecasters have hinted at - then the current composition of inflation (largely imported) gets leant into by a stronger pound, all else equal," said Simon French, chief economist at Panmure Gordon.

Rishi Sunak, Britain's finance minister, on Friday played down the impact his cost-of-living support package would have on inflation, saying it would be less than 1 percentage point.

MUFG analyst Derek Halpenny said the package would help cancel out the hit to real incomes from an expected energy bill rise in October. He expects this will likely lead the Bank of England to modify its recent "very grim forecasts" that predicted no growth through the rest of this year and a contraction in the fourth quarter and in 2023.

The Bank of England might therefore be encouraged to raise interest rates further than the two 25 basis point hikes MUFG expects, Halpenny said.

But with 125 bps of hikes priced in for 2022 he doubted this week's package would raise rate rise expectations, meaning "the impact on the pound will be marginal".

Sterling heads for second weekly gain, aided by UK support package

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Our Apps
© 2007-2022 Fusion Media Limited. All Rights Reserved.
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
  • Sign up for FREE and get:
  • Real-Time Alerts
  • Advanced Portfolio Features
  • Personalized Charts
  • Fully-Synced App
Continue with Google
Sign up with Email