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The pound has fallen sharply after the chancellor announced the biggest tax rises in a generation.

Over the last three days, sterling has dropped by 1.2% (in trade weighted terms) – the biggest fall in 18 months.

Between around 1.30pm and 5.30pm today, versus the dollar, it dropped from about 129.9c to the pound to about 128.6c. In the same period, against the euro, it went from 119.3c to the pound to about 118.4c.

In addition, yields for 10-year UK bonds – the cost or interest rate charged for long-term government borrowing – have gone past 4.5% for the first time in a year.

Ed Conway, Sky News’s economics and data editor, said those yields are “pretty much halfway towards the danger zone” – a zone identified by the Office for Budget Responsibility (OBR).

However, he said other European bonds had risen, too. “But the UK does seem to be moving faster than most of the others,” he added.

While cautioning that the budget is still very new, Conway said the “upshot” is that Rachel Reeves’s “room for manoeuvre” is already diminishing “because of market moves”.

Markets are reacting in “quite a violent way”, Conway said.

“It’s really unusual to see this after a budget, and that will have a bearing on how much this government will be able to afford in the future,” he added.

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‘Raising taxes was not an easy decision’

A sudden rise in the yields of 10-year UK bonds followed Liz Truss’s disastrous “mini-budget” of September 2022, which led to a surge in the cost of borrowing for ordinary consumers, while the pound slumped to a 37-year low against the dollar.

It is “certainly not like that at the moment”, Conway said.

Nonetheless, market movements will be “enough to really concern people at the Treasury”, he added, “because it suggests that a lot of traders are looking at how much money this government is borrowing, and they’re saying: ‘Hang on, maybe we’re going to charge you more’.”

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The pound has weakened and gilt yields – the cost of borrowing by the UK government – has increased in response to the budget, which saw Rachel Reeves introduce the biggest tax hike in a generation.

While Conway said it does not feel like a “crisis point”, he said the “calculus for this government” may be changing.

Jack Meaning, UK chief economist at Barclays, said market reaction was “materially different” to what happened in 2022.

Bond yields since Ms Reeves’s budget are up by about 0.3%, while in 2022 the rise was about 1.5%, he said.

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Reeves acting like ‘compulsive liar’

The conversation Barclays is having with its customers is also different to that in 2022, Mr Meaning added.

At that time, people were wondering whether a “big crisis point” had been reached.

This time, he said the focus is on comments from the OBR about a potential rise in inflation, and the potential knock-on effect as the Bank of England makes decisions on interest rates in the next few months.

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The prime minister’s official spokesperson refused to talk about bond prices.

“We don’t comment on market movements,” they said.

“The chancellor has been very clear that first and foremost, this budget has been about restoring fiscal stability, and she’s outlined two new robust fiscal rules, which put public finances on a sustainable path.”

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Vietnam legalizes crypto under new digital technology law

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Vietnam legalizes crypto under new digital technology law

Vietnam legalizes crypto under new digital technology law

Vietnam has passed a sweeping digital technology law that legalizes crypto assets and outlines incentives for AI, semiconductors, and infrastructure.

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Brazil ends crypto tax exemption, imposes 17.5% flat rate on gains

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Brazil ends crypto tax exemption, imposes 17.5% flat rate on gains

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Brazil scraps crypto tax exemption for small traders, enforces flat 17.5% rate across all gains, including self-custody and offshore holdings.

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A scrambled G7 agenda as world leaders scramble to de-escalate the Israel-Iran conflict

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A scrambled G7 agenda as world leaders scramble to de-escalate the Israel-Iran conflict

The return on Donald Trump to the G7 was always going to be unpredictable. That it is happening against the backdrop of an escalating conflict in the Middle East makes it even more so.

Expectations had already been low, with the Canadian hosts cautioning against the normal joint communique at the end of the summit, mindful that this group of leaders would struggle to find consensus.

Canadian Prime Minister Mark Carney carefully laid down an agenda that was uncontroversial in a bid to avoid any blow-ups between President Trump and allies, who of late have been divided like never before – be it over tariffs and trade, Russia and Ukraine, or, more recently Israel’s conduct in Gaza.

But discussions around critical minerals and global supply chains will undoubtedly drop down the agenda as leaders convene at a precarious moment. Keir Starmer, on his way over to Canada for a bi-lateral meeting in Ottawa with PM Carney before travelling onto the G7 summit in Kananaskis, underscored the gravity of the situation as he again spoke of de-escalation, while also confirmed that the UK was deploying more British fighter jets to the region amid threats from Tehran that it will attack UK bases if London helps defend Israel against airstrikes.

Canadian Prime Minister Mark Carney is greeted by President Donald Trump as he arrives at the West Wing of the White House, Tuesday, May 6, 2025, in Washington. (AP Photo/Mark Schiefelbein)
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Canadian PM Mark Carney is greeted by President Donald Trump at the White House in May. Pic: AP

Really this is a G7 agenda scrambled as world leaders scramble to de-escalate the worst fighting between Tel Aviv and Tehran in decades. President Trump has for months been urging Israel not to strike Iran as he worked towards a diplomatic deal to halt uranium enrichment. Further talks had been due on Sunday – but are now not expected to go ahead.

All eyes will be on Trump in the coming days, to see if the US – Israel’s closest ally – will call on Israel to rein in its assault. The US has so far not participated in any joint attacks with Tel Aviv, but is moving warships and other military assets to the Middle East.

Sir Keir, who has managed to strike the first trade deal with Trump, will want to leverage his “good relationship” with the US leader at the G7 to press for de-escalation in the Middle East, while he also hopes to use the summit to further discuss the further the interests of Ukraine with Trump and raise again the prospects of Russian sanctions.

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“We’ve got President Zelenskyy coming so that provides a good opportunity for us to discuss again as a group,” the PM told me on the flight over to Canada. “My long-standing view is, we need to get Russia to the table for an unconditional ceasefire. That’s not been really straightforward. But we do need to be clear about what we need to get to the table and that if that doesn’t happen, sanctions will undoubtedly be part of the discussion at the G7.”

Prime Minister Sir Keir Starmer (right) is greeted by Prime Minister of Canada Mark Carney as he arrives at Rideau Cottage in Ottawa
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Prime Minister Sir Keir Starmer (R) is greeted by Mark Carney as he arrives in Ottawa ahead of the G7

But that the leaders are not planning for a joint communique – a document outlining what the leaders have agreed – tells you a lot. When they last gathered with Trump in Canada for the G7 back in 2018, the US president rather spectacularly fell out with Justin Trudeau when the former Canadian president threatened to retaliate against US tariffs and refused to sign the G7 agreement.

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Since then, Trump has spoken of his desire to turn Canada into the 51st state of the US, a suggestion that helped catapult the Liberal Party beyond their Conservative rivals and back into power in the recent Canadian elections, as Mark Carney stood on a ticket of confronting Trump’s aggression.

With so much disagreement between the US and allies, it is hard to see where progress might be made over the next couple of days. But what these leaders will agree on is the need to take down the temperature in the Middle East and for all the unpredictability around these relationships, what is certain is a sense of urgency around Iran and Israel that could find these increasingly disparate allies on common ground.

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