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Pound wipes gains against dollar after Truss and Kwarteng's OBR meeting

The pound fell yet again as UK fiscal angst remains. Photo: Matt Cardy/Getty
The pound fell yet again as UK fiscal angst remains. Photo: Matt Cardy/Getty (Matt Cardy via Getty Images)

The pound (GBPUSD=X) erased gains from a an earlier rally on Friday after the Office for Budget responsibility (OBR) held a meeting with Liz Truss and Kwasi Kwarteng.

It fell 0.7% to $1.10 against the dollar, down from the $1.12 it touched in early trade when sterling briefly erased all of the losses it made since the mini-budget last week.

Against the euro (GBPEUR=X) it was unchanged at €1.13.

Read more: Why has the pound fallen and what does this mean for you?

The prime minister and chancellor met the OBR committee, including chair Richard Hughes on Friday, where they reaffirmed their commitment to the independent regulator and made clear that they value its scrutiny.

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The UK's independent fiscal watchdog provides forecasts on the economy and public finances based on government plans.

The OBR confirmed it will deliver the first version of a forecast on 7 October that will go with the chancellor's medium term plan in November.

Kwarteng previously promised to publish OBR forecasts alongside a new medium-term fiscal plan on 23 November, but was urged by MPs to do that sooner.

It comes after days of market volatility triggered by the government’s package of unfunded £45bn tax cuts.

"The pound remains susceptible to further lurches lower as neither of the above fix the underlying problems facing the UK: rising twin deficits, soaring inflation that hits consumers, rising mortgage rates that cripples families, anaemic growth," said Neil Wilson, chief market analyst at Markets.com.

Read more: What happened to the markets in the 60 minutes Liz Truss was on the radio?

The pair's fiscal measures, which they both doubled down on, have sent markets into a downward spiral.

On Thursday, they used media interviews to insist that they would not ditch any element of their tax-cutting announcements, after a week that saw sterling plunge to an all-time low and bond market turmoil.

Instead, Truss and Kwarteng made it clear that a squeeze on government departments was coming, with public spending remaining at levels agreed in 2021 despite inflation eating into those budgets.

Read more: Bank of England: What will the emergency action actually do?

The market turmoil has also seen the Bank of England intervene to stabilise the UK economy and prevent a domino effect after sterling's crash.

Threadneedle Street was forced to spend £65bn buying government gilts to repair the damage done to financial markets.

BoE chief economist Huw Pill earlier this week signalled that the Bank was ready to significantly ramp up interest rates to shore up the pound and guard against increased inflation.

Watch: What's behind the UK market turmoil?