The pound (GBPUSD=X) rallied on Friday and briefly erased all of the losses it made since chancellor Kwasi Kwarteng’s mini-budget last week.
Sterling rose 0.3% against the dollar to $1.11 in early trade as UK fiscal concerns wane. Against the euro (GBPEUR=X) it was also up 0.3% to €1.13.
Read more: Why has the pound fallen and what does this mean for you?
The move comes after days of market volatility triggered by the government’s package of unfunded £45bn tax cuts.
Prime minister Liz Truss and Kwarteng’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: What happened to the markets in the 60 minutes Liz Truss was on the radio?
The pair are due to meet the chief of the Office for Budget Responsibility (OBR) Richard Hughes on Friday to discuss the fallout following last week’s partial budget.
The UK’s independent fiscal watchdog provides forecasts on the economy and public finances based on government plans.
Kwarteng has promised to publish OBR forecasts alongside a new medium-term fiscal plan on 23 November, but he has been urged by MPs to do that sooner.
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?
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