Return to climb the sterling and i British government bonds (Gilt)after the Premier Keir Starmer has renewed his support To the Minister of the Treasury and Chancellor of the chessboard Rachel Reeves. The crisis had opened yesterday, in the wake of the parliamentary flop of the welfare reform and the discharged attitude of the Chancellor, who had fueled voices of possible resignation, then denied by the staff of the number 10 of Downing Street,
Gilt and pound in recovery after black Wednesday
Wednesday It was one day of passion For British markets And for the pound area, after the chancellor had presented his reform of welfare, which imposes very painful cuts to respect the budget rules and restore British public finances. But the negative reaction of the markets had been triggered mostly sinceReeves attitudewho had not been able to hold back the tears in the classroom, during the speech of Prime Minister Starmer, who had fueled The hypothesis of his retreat.
But the confirmation and the support reiterated by the British government they overturned things and today, the pound recovers Both on the dollar at 1.3658 USD (+0.15%) and on the euro at 1.1590 (+0.29%). Parallel, the performance on the GILT at 10 years has come back to go downreaching 4.545% from 4.621% reached yesterday, while the thirty -year yield led to 5.343% from 5.415% on the eve.
London’s City also highlights a good recovery, with an index FTSE 100 which rises by 0.52%doing slightly better than other continental lists.
Premier Starmer confirms his trust in Reeves
After yesterday’s tears, in Fornero style, and the speech pronounced yesterday in the classroom by British leader Keir Starmerwho had spoken the question of the leader of the opposition Kemi Badenoch on the stay of the Chancellor in his assignment, the head of the government has renewed his trust (perhaps a little late) in the Chancellor Reeves. This temporarily calmed the markets, which had agitated on the hypothesis of a new lap of armchairs, but the volatility remains high In view of the painful choices that the British government will have to make in the autumn.
The difficult choices of the British government
The reaction of the markets appears more understandable in view of the difficult choices that the British government will have to make next autumn, changing the current budget rules or By increasing taxes. If the second choice appears decidedly unpopular, the first is seen negatively by the markets, which consider it a Undesirable step backwards.
The current rules budget, in fact, impose on the government of the United Kingdom to close the Current budget at the end of the decade in surpluswith a surplus hypothesis of about 20 billion in the year 2029-2030. But the cutting of growth estimatesalmost halved by theffice for Budget Responsibility, and the high level of public debt have Reduced the room for maneuverforcing the Chancellor Reeves to announce painful welfare cuts (Healthcare, disability support and so on), rather than giving in to an increase in taxes. Cuts that have been harshly criticized by the opposition, but also by the parliamentarians who support the government, increasingly skeptical on the economic strategy of Reeves.
