<p>Headlines:</p><ul><li><a target=“_blank“ href=“https://www.forexlive.com/news/uk-finance-minister-hunt-we-will-reverse-almost-all-tax-measures-announced-on-23-sept-20221017/“>UK finance minister Hunt: We will reverse almost all tax measures announced in growth plan</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/news/the-pillars-of-truss-have-fallen-20221017/“>The pillars of Truss have fallen</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/news/china-says-will-delay-release-of-q3-economic-indicators-including-tomorrows-gdp-20221017/“>China says will delay release of Q3 economic indicators, including tomorrow’s GDP</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/news/whats-behind-the-sudden-plunge-in-snb-sight-deposits-20221017/“>What’s behind the sudden plunge in SNB sight deposits?</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/news/snb-total-sight-deposits-we-14-october-chf-6198-bn-vs-chf-6393-bn-prior-20221017/“>SNB total sight deposits w.e. 14 October CHF 619.8 bn vs CHF 639.3 bn prior</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/news/china-state-banks-seen-acting-in-swaps-market-to-try-and-stabilise-the-yuan-currency-20221017/“>China state banks seen acting in swaps market to try and stabilise the yuan currency</a></li></ul><p>Markets:</p><ul><li>GBP leads, JPY lags on the day</li><li>European equities higher; S&P 500 futures up 1.2%</li><li>US 10-year yields down 5.3 bps to 3.953%</li><li>Gold up 1.0% to $1,657.63</li><li>WTI crude up 0.1% to $85.63</li><li>Bitcoin up 1.5% to $19,463</li></ul><p style=““ class=“text-align-justify“>The day started with a gap higher in the pound as traders hoped for a turn in the fiscal path to be set out by newly appointed UK finance minister, Jeremy Hunt. An emergency statement was then called and Hunt delivered by ripping apart the mini-budget that was announced on 23 September.</p><p style=““ class=“text-align-justify“>UK bonds and the pound rallied going into the statement and largely held their ground in the aftermath. 30-year gilt yields are down 42 bps to 4.36% while GBP/USD had a kneejerk jump from 1.1280 to 1.1330 before falling back to 1.1250 and is now back up to 1.1290-00 levels.</p><p style=““ class=“text-align-justify“>The better mood in cable is also helped by a softer dollar overall, as equities are taking comfort amid a bid in bonds as well today. US futures are up over 1% and that is feeding into better sentiment in broader markets and among major currencies.</p><p style=““ class=“text-align-justify“>EUR/USD is up 0.2% to 0.9740 but off earlier highs of 0.9770. Meanwhile, USD/CAD is down 0.5% to near 1.3800 and AUD/USD is up 0.8% to 0.6245 but off its earlier high of 0.6265 during the session. USD/JPY is a notable exception as the yen stays under pressure, with the pair now up 0.1% to 148.85 – holding near fresh highs since 1990.</p><p style=““ class=“text-align-justify“>It looks like we’re in for a calmer start to the week but all of this is <a target=“_blank“ href=“https://www.forexlive.com/news/counting-down-to-the-central-bank-bonanza-20221017/“ target=“_blank“>right before we get to the central bank bonanza</a> in the next two weeks, so perhaps it is just the calm before the storm.</p>

This article was written by Justin Low at forexlive.com.

<p style=““ class=“text-align-justify“>The pair was holding around 1.1280 before Hunt’s statement came and right after, it pushed to a high of 1.1330. That came as the dollar also softened as risk trades extended gains but now we’re seeing a bit of a pullback in cable to 1.1270-80 levels again. One can argue that we already saw the bullish price action come into play at the start of the day but even so, the reaction here is rather tepid in my view.</p><p style=““ class=“text-align-justify“>So, what is next for the pound in this instance?</p><p style=““ class=“text-align-justify“>I think the main takeaway is that this whole political and finance crisis related to Trussnomics can be put to bed at least. That could see gilt yields pull back further but at the same time, it also means that the BOE is likely not needed to overextend and to do more by acting aggressively in order to address whatever policy missteps there might have been from the government.</p><p style=““ class=“text-align-justify“>The fact that Hunt also announced that the energy price cap will only last until April next year is a testament to that, in the sense that the government is now working more in line with the central bank.</p><p style=““ class=“text-align-justify“>However, when you look at where this puts us, it is basically a reset to September. What does that mean? It means that we are still looking at a position where the UK economy is still struggling to deal with high inflation, the cost-of-living crisis, an energy crunch and a pending recession that could last for up to a year.</p><p style=““ class=“text-align-justify“>That’s not exactly a pretty picture now, is it?</p><p style=““ class=“text-align-justify“>And when you consider that against the backdrop of a Fed that is still aggressively tightening and not letting up in terms of putting the pedal to the metal, the path of least resistance still seems for a move lower in cable.</p><p style=““ class=“text-align-justify“>In the bigger picture, we already got that corrective bounce from 1.04 to 1.15 in the past few weeks and so there is appetite for sellers to come back into the fray. All there is now is to watch for equities sentiment (indirectly dollar sentiment) as we look towards the central bank bonanza in the coming two weeks.</p><p style=““ class=“text-align-justify“>If there is a material breakdown to the levels pointed out <a target=“_blank“ href=“https://www.forexlive.com/news/us-futures-higher-but-key-technicals-are-being-questioned-20221017/“ target=“_blank“>here</a>, expect another rush into dollars and broader markets to sell off again as it has done over the past few months.</p>

This article was written by Justin Low at forexlive.com.

<p style=““ class=“text-align-justify“>And Jeremy Hunt has just announced that all of said tax cuts in the so-called „growth plan“ is now abandoned. So, now what?</p><p style=““ class=“text-align-justify“>If you look at things, it really has been an extraordinary couple of weeks in the UK. What exactly was the purpose of this whole exercise then? There is no backing to the narrative that Truss is pushing a „growth plan“ as whatever policy that is now going to take shape is essentially the same thing as it would have been with Johnson and Sunak in their previous positions.</p><p style=““ class=“text-align-justify“>It’s a real mess politically now and there is essentially no hiding place for Truss. It will be hard to see how she can survive such a blow in confidence and credibility.</p><p style=““ class=“text-align-justify“>In any case, markets will be happy with Hunt’s announcement and the biggest winners? The Bank of England, of course.</p>

This article was written by Justin Low at forexlive.com.

<ul><li>Basic rate of income tax will remain at 20% indefinitely</li><li>It is not right to borrow in order to fund tax cuts</li><li>Energy price guarantee will not change until April, thereafter will be targeted</li><li>Will no longer be proceeding with cuts to dividend tax rates</li><li>No longer proceeding with new VAT-free shopping scheme for non-UK visitors</li></ul><p style=““ class=“text-align-justify“>One wonders what was the whole point of the exercise over the past few weeks then. So, pretty much everything that was announced previously will be gone and only the National Insurance and stamp duty cut will stay. The income tax hold even walks back on Sunak’s commitment (he planned to cut it at a later date). So, essentially a total reversal of the entire „growth plan“ that was announced at the end of last month.</p><p>/<a target=“_blank“ href=“https://www.forexlive.com/terms/g/gbp/“ target=“_blank“ id=“3a5ab7c1-ff09-45ea-87d4-eea6613bb754_1″ class=“terms__main-term“>GBP</a></p>

This article was written by Justin Low at forexlive.com.