What has helped calm market nerves was a comment by a top UK Treasury official who claimed ‘meeting the fiscal rules is non-negotiable’, ING’s FX analyst Francesco Pesole notes.GBP/USD can attract buyers in the 1.225-1.230 area“In practice, this means that since the rise in yields has eroded the fiscal headroom, Chancellor Rachel Reeves is more likely to deliver some fiscal consolidation should the updated OBR forecasts show the government is not on track to meet the fiscal rule.
”“The market seems to be acknowledging the Treasury’s reiterated fiscal pledges and this has prevented the gilt and pound selloffs from becoming disorderly. As discussed in this note, this is not a sovereign crisis, and the rise in yields is – so far – justified.”“This suggests we can expect some short-term respite for the pound.