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The beleaguered pound has received “a much-needed boost” from reports that incoming Prime Minister Liz Truss had drafted plans to avert an energy crisis, reports Bloomberg.
But it also warns that “the jury’s out on how long it’ll last”, given sterling’s weakness, and risks of a UK recession.
The currency has fallen for three straight months but analysts surveyed by Bloomberg expect it to climb to $1.19 by March 2023.
“Sterling is rising on the argument that the UK economy might not now take such a big hit from energy prices,” said Ray Attrill, head of FX strategy at National Australia Bank Ltd. in Sydney.
Truss, who will be appointed by the Queen today, is ready to cap the cost of gas used for electricity and heating. This would effectively commit the taxpayer to paying Britain’s energy bills beyond a certain level to stop widespread hardship and bankruptcies.
The Telegraph understands that, among the moves to tackle the cost of living crisis set to be unveiled this week, Ms Truss could freeze energy bills for all households until 2024.
The “huge” policy intervention would last longer and cost tens of billions of pounds more than the Labour Party’s proposal to cap prices at their current levels until early 2023.
