UK Unveils $46Bn Scheme for Energy Companies
Great Britain pound bounces as UK Prime Minister Elizabeth Truss unveiled Thursday in Parliament a 40 billion-pound-sterling or $46.2 billion scheme to provide additional liquidity to energy companies amid volatile markets.
The government is setting up the scheme with the Bank of England, as energy suppliers across Europe struggle with record-high prices of power and gas following Russia’s invasion of Ukraine and the reduced supply from Moscow.
“This will stabilize the markets and decrease the likelihood that energy retailers need our support like they did last winter,” Truss added.
The pound recovered from early losses on Thursday after new British Prime Minister Truss announced policies aimed at mitigating surging energy prices Sterling was last at $1.1562, up 0.23% on the day, having fallen as low as $1.1479 earlier in morning trade. It hit $1.1407 on Wednesday, its lowest since 1985.
Truss announced a cap on soaring consumer energy bills for two years on Thursday in a package aimed at limiting the economic shock of the war in Ukraine that could cost the country about 150 billion pounds ($172 billion).
“The highlight of the Truss announcement is the energy intervention, expected to curb peak inflation by up to 5 percentage points,” said Kenneth Broux, currency strategist at Societe Generale.
“For the market, this is the big takeaway. The reason cable (sterling/dollar) has come down so much is not just a strong dollar but also the surge in inflation expectations.” READ: UK Ready to Support Ukraine with $500m Loan
Broux added that the UK inflation curve was reacting positively to the headlines and if inflation expectations come down “that saves the pound from new lows,” though he said it was too early to recommend buying sterling on the dips.
The pound has lost nearly 15% against the dollar so far this year, also hurt by slowing economic growth. # UK Unveils $46Bn Scheme for Energy Companies
