Liz Truss becomes Britain's new prime minister on Tuesday, facing inflation at 40-year highs, the biggest squeeze on household living standards in decades and a looming recession.
The newly elected Conservative Party leader has pledged to slash taxes to kick-start growth and is expected on Thursday to unveil her plan for the energy crisis. Further policy announcements are likely in the weeks ahead.
The currency on Monday fell to its weakest since March 2020 at $1.1444 , before rebounding to $1.16 on Tuesday. But the pound has failed to get much love from the ramp-up in BoE rate hike expectations and sterling's fortunes are tied to global sentiment, which doesn't favour the UK.Issue of TrussAugust was the worst month for 10-year gilts since 1986, with yields surging 94 basis points .That was partly due to another gas price surge, but also expectations that a Truss government will increase fiscal spending.
Citi expects fiscal support in the coming weeks to include an additional 40 billion pounds in net fiscal easing this year, and just shy of 70 billion next year.British stock markets look unlikely to rebound, although they are at the mercy of global sentiment as much as Truss' policy plans.
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