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Gilts move higher but GBP rally contained on announcement of Truss presser

UK
  • Few thoughts on the moves following the confirmation that Truss is holding a press conference later:
    1. If basic rate income tax cut / NIC hike reversal are not reversed we still have at least 50-60% of the original Growth Plan intact.
    2. In terms of the part that will impact the BOE's policy decision the income tax cut and lack of NIC hike are the measures most likely to directly increase consumers' disposable income - and hence most likely to drive more aggressive rate hikes.
  • However, this will mean less borrowing over the medium-term, and is further confirmation that the govt is willing to back down and listen. So gilts have moved higher on the lower borrowing concerns, but the plan is still inflationary and underlines the uncertainty in UK policy - which is probably stopping the pound rally as much as it otherwise would.
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