Pound gains as new chancellor Jeremy Hunt set to announce financial plan

It comes weeks after Kwasi Kwarteng’s tax-slashing measures spooked markets

The pound has rebounced as the British chancellor announced he would make an emergency fiscal statement in a bid to calm market chaos.

Jeremy Hunt is expected to set out billions of pounds in savings to stabilise public finances after his predecessor’s tax-slashing mini-Budget spooked markets.

Sterling made gains on Monday, rising from just over $1.12 in early trading to just under just $1.13 at around 6.45am - shortly after Mr Hunt made the announcement of an emergency statement.

The pound dropped to around $1.25 later in the morning.

It follows a slump after Kwasi Kwarteng was sacked as chancellor on Friday just weeks into the role.

The pound fell to a record-low during Mr Kwarteng’s tenure amid the fallout from the mini-Budget, which promised a host of tax cuts including for the richest in society.

The Bank of England launched an emergency bond-buying programme at the end of last month amid market turmoil. It said the scheme - which made around £19.3bn worth of purchases and closed on Friday - “enabled a significant increase in the resilience of the sector”.

The central bank launched a scheme to purchase up to £65 billion of UK government bonds, called gilts, in order to help stabilise prices amid a sell-off amid concerns over unfunded tax cuts in the former chancellor’s mini-budget.

After his surprise appointment to chancellor, Mr Hunt effectively tore up Ms Truss and Mr Kwarteng’s previous economic strategy to cut taxes in an attempt to boost growth.

Instead, he warned that taxes would have to go up while spending would rise less quickly than had previously been planned.

The Treasury said Monday’s emergency statement was designed to “ensure sustainable public finances underpin economic growth”.

Jeremy Hunt was appointed as the new UK chancellor on Friday (Getty Images)

Among the measures announced by Mr Kwarteng expected to be ditched are his promise to bring forward a 1p cut in the basic rate of income tax to April.

After making his snap statement, the chancellor will address the House of Commons ahead of the publication of his full medium-term fiscal plan on 31 October.

The measures come as Ms Truss continues to fight to hold on to her leadership, with three Conservative MPs already breaking ranks to call on her to go.

The government has already been forced to make two U-turns since coming into power after the mini-Budget sparked market chaos and backlash.

It climbed down on tax cuts for the highest earners at the start of the month. Shortly after Mr Kwarteng was sacked on Friday, Ms Truss announced a U-turn on corporation tax after the mini-Budget had promised to scrap a planned increase.

Mr Hunt carried out something of a media blitz on behalf of the prime minister over the weekend. He insisted she was still in charge even as he diagnosed the need for a tough package of tax rises and spending cuts in order to steady the UK economy.

Additional reporting by Press Association