British pound rises after reports of UK government reversing tax cuts

The British pound showed signs of recovery on Thursday after reports claiming that the Liz Truss-led government can completely abandon their plans to introduce unfunded tax cuts. The pound jumped against the United States Dollar by 1.5 per cent to reach $1.1269 during afternoon deals in London.

The mini budget presented by finance minister Kwasi Kwarteng was not accepted kindly by the public as the pound previously dropped to its lowest against the dollar. The tax cuts were a key element of Truss’ campaign promises but the implementation earned criticisms from all corners.

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A number of international organisations – including the International Monetary Fund and the Bank of England – expressed their concerns regarding the tax cuts. In the aftermath of the fall in pound’s value, the Bank of England had to expand their buying of government bonds to stablise the market.

However, Truss and Kwarteng have both decided to not implement all the measures mentioned in the budget and that has come as good news for the market. The pound has somewhat stabilised with the tax cuts not taking place and it was further boosted by the US inflation data.

Meanwhile, reports suggest that Truss can be facing some rebellion from inside the Conservative Party. Paul Goodman, former Tory MP and editor of the influential ConservativeHome blog, said that party members can be looking at former finance minister Rishi Sunak as a possible alternative.

"All sorts of different people are talking about all sorts of different things because the Conservative backbenchers are casting around for a possible replacement for (finance minister) Kwasi Kwarteng, even for a possible replacement for Liz Truss," he told BBC in an interview.

"One idea doing the rounds is that Penny Mordaunt and Rishi Sunak, who, after all, between them got pretty much two-thirds of the votes of MPs (in the leadership contest), come to some kind of arrangement and essentially take over," he added when asked about possible options.