The mother of all U-turns

A humiliating blow

Another turbulent start to the week, albeit a positive one broadly speaking with equity markets around 1% higher in Europe after a decent start to the week in Asia.

Since Liz Truss became UK Prime Minister, uneventful days have eluded us and this week has also got off to another hectic start. While the Prime Minister had every intention of making waves in her first weeks in charge, she clearly didn’t anticipate the storm that was brewing and I’m sure she more than anyone at this point would do just about anything for a more peaceful few weeks.

Assuming she lasts that long, of course. The u-turn this morning was even more historic than the initial mini-budget. A humiliating moment after a chaotic period for Truss in which confidence in her in the markets, the public and her own party, it seems, has been decimated.

That said, we are seeing some improvement from a market perspective. It just took reversing almost all of the unfunded tax cuts to achieve it. Who’d have thought? The job isn’t done yet though, the new Chancellor has done what was necessary now but the harder decisions arguably come later this month in the budget.

How low can it go?

The yen is continuing to slide against the US dollar, hitting 148.89 this morning and trading beyond the level the country intervened at in 1998 and, of course, last month. We’ve had the usual plethora of commentary from various officials overnight; “high sense of urgency”, “ready to act” etc.

It does seem only a matter of time until we get another powerful intervention in the FX markets, it’s just a question of what they’ll do differently this time as doing the same again every few weeks simply isn’t sustainable. The question is whether the yen will surpass 150 against the dollar first.

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