The pound and UK government borrowing costs have stabilised after a turbulent few days.
The pound rose slightly to $1.22 early on Tuesday after having fallen to around $1.21 on Monday, its lowest level since November 2023, while government borrowing costs dipped slightly.
Borrowing costs have been rising for many countries across the world, but some have argued that decisions made in the Budget appear to have made the UK more vulnerable.
The recent market moves have put Chancellor Rachel Reeves under pressure. On Monday, Prime Minister Sir Keir Starmer said she was doing an “amazing job” but the Conservatives said she was “hanging on by her fingernails”.
Reeves faces questions in the Commons this afternoon for the first time since she returned from a trip to China at the weekend.
She said the trip would improve economic ties with Beijing, but the Conservatives said she had “fled” during a time of uncertainty in financial markets.
Governments generally borrow money by selling bonds to big investors, such as pension funds. UK government bonds are known as gilts.
The yield on the 10-year gilt – the interest rate at which the government pays back a decade-long loan to investors – dropped marginally to 4.87% on Tuesday, having risen to nearly 4.9% on Monday, its highest level for 17 years.
Meanwhile, the 30-year gilt yield edged down to 5.42% from 5.44% on Monday, its highest in 27 years.
Government debt costs in Germany, France, Spain and Italy have also been rising. Experts say investors are predicting US president-elect Donald Trump’s tariffs will increase US inflation, meaning interest rates will remain high there and elsewhere.
