GBP/USD Rises as Healey Pledges Fiscal Discipline

UK Finance Minister John Healey's pledge to maintain fiscal discipline has boosted investor confidence in the pound, causing it to rise against the US dollar. The sterling's strength is also due in part to the weakness of the greenback. Healey's speech failed to provide clear direction for the pound, but his commitment to curbing rising costs and giving regions more power to attract private investment has helped restore the UK's credibility in the international bond market.

The 10-year gilt yield remains around 5.15%, a relief after it traded at its highest level since 2008 last week. Higher borrowing costs had been driven by renewed inflation concerns, particularly amid the US-Iran conflict and uncertainty over Prime Minister Andy Burnham's spending plans. Oil prices have also risen to a seven-week high after increasing 10% last week following the US strike on Iranian oil tankers.

On the data front, UK firms increased full-time hiring in August for the first time in four years. The Bank of England is not expected to raise interest rates next week, but market expectations are that a rate hike will occur before the end of the year, providing some support to the pound.