The pound climbs after tax cut reversal and S&P 500 rallies as horrible economic data fuels bets on Fed pause.

The British pound climbed the ladder today after a reversed plan to cut the highest rate of income tax, weakening the dollar. Sterling was last up 1.5% at £1.1318 against the dollar and the dollar also weakened against other major currencies such as the Euro and Yen (investing.com).

As the boost from the u-turn continues, the British finance minister announced he would publish details on how he planned to lower public debt as a share of economic output over the medium term (investing.com). Initially, he said the plan was to deliver the fiscal statement on November 23rd, however in the speech to the Conservative party he said the statement will be released 'shortly'. Rumour has it that the statement will set out a 5-year plan to put debt on a downward route, including a tight squeeze on public spending (investing.com).

 

The S&P 500 started the final quarter on the front foot, led by energy and tech, investors hope that hints of slowing growth will persuade the Federal reserve to slow the pace of rate hikes. The S&P was up by 3% and the Dow gained 3% (869 points), the Nasdaq was up 2.6% (investing.com).

Furthermore, weaker than expected economic results on manufacturing and construction activity, worse than initially feared, has investors hoping that the Fed may also be forced to take a step back (investing.com). This would help the economy to avoid being pushed into a deep recession. The odds of the Fed applying another 75bp rate hike fell 59% from 72% a week ago, according to investing.com's "Fed rate monitor tool". Maybe this month will not be as bad for investors as they thought. 

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