Sterling briefly jumps after British government tax U-turn

The pound briefly jumped on Monday on news Britain would reverse plans to cut the highest rate of income tax, one contentious part of a package of financial measures that last month sent sterling and British government bonds tumbling.

“It is clear that the abolition of the 45p tax rate has become a distraction from our overriding mission to tackle the challenges facing our country,” finance minister Kwasi Kwarteng said in a statement.

The pound rose as high as $1.128 after news of the U-turn was reported by the BBC, the currencys highest level since Sept. 22, the day before Kwarteng announced a new “growth plan” that would cut taxes and regulation, funded by vast government borrowing.

Sterling then gave up most of those gains and was last at $1.1177 up 0.1%.

The euro was down 0.27% against the pound at 87.61 pence.

“From a markets perspective, it is a good step in the right direction. It will take time for markets to buy the message but it should be ease the pressure, ” said Jan von Gerich, chief analyst, Nordea

“Questions still remain and sterling will likely remain under pressure,” he added.