Pound jumps on U-turn on tax cuts

The British pound jumped to above 1.1250 at one point against the dollar, as UK finance minister Kwasi Kwarteng announced the UK government is reversing its planned scrapping of the top rate of income tax.

Over the weekend UK PM Liz Truss shifted the blame on Kwarteng for desiring rate cuts, but insisted the tax cuts were needed.

The humiliating U-turn could bring some stability to UK gilts as investors are reassured about the government budget picture.

Nonetheless, traders must keep in mind the GBP/USD is also very much a dollar story as the US currency has appreciated more than 15% this year versus a basket of currencies.