The new British prime minister announced an overhaul of the energy market today as part of a wider package of support with soaring bills.
Truss froze energy bills for households and businesses, with a cap at £2,500 ($2,873) staring 1 October until 2024, rather than the average bill rising over £3,500 next month as planned.
In one of her first acts as PM, the government is expected to borrow at least £100bn to fund the support package. New chancellor Kwasi Kwarteng will set out the expected costs of the energy package in a fiscal statement later this month.
Decades of short-term thinking on energy has failed to focus enough on securing supply — with Russia’s war in Ukraine exposing the flaws in our energy security and driving bills higher. I’m ending this once and for all,” Truss told the House of Commons.
“I’m acting immediately so people and businesses are supported over the next two years, with a new Energy Price Guarantee, and tackling the root cause of the issues by boosting domestic energy supply.
“Extraordinary challenges call for extraordinary measures, ensuring that the United Kingdom is never in this situation again.”
The pound inched higher on the back of the news, up 0.15% at $1.1550 against the dollar.
However, this is only a cent and a half above Wednesday’s 37-year low. Sterling dropped to its lowest level against the dollar since 1985, as low as $1.1403 — its weakest since Margaret Thatcher was prime minister.
It still leaves the pound down against the US greenback by more than 14% this year.
Watch: UK's Truss rules out windfall tax on energy firms
Meanwhile, the ECB revealed the biggest interest rate hike in its history as it tackles runaway inflation in the eurozone.
The bank’s governing council voted to raise all three key interest rates by 75 basis points, or 0.75% percentage points.
It comes after eurozone inflation hit a record high of 9.1% last month.
“The risk for the eurozone here is that by setting up a 75bp hike, they create a rod for their own back, with markets expecting similar sized moves as inflation continues to rise,” Joshua Mahony of IG said.
“The Russian decision to shut off all gas exports to Europe provides expectations that energy will continue to drive headline inflation higher, while a declining euro also brings imported inflation.
“With that upward trajectory for inflation in place, this sharp rise in borrowing costs could come at the expense of fiscal stability in less stable member states such as Italy.”
Watch: How does inflation affect interest rates?
It came as Federal Reserve chair Jerome Powell delivered hawkish comments, which cemented bets of another large interest rate hike later this month.
The Fed is "strongly committed" to controlling inflation but there remains hope it can be done without the "very high social costs" involved in prior inflation fights, Powell said this afternoon.
On Wednesday, US Treasury yields took a pause for breath, sending each of the main indices higher, but still significantly south of their opening levels of 2022.
In the year to date, the Dow Jones has retreated by 13%, the S&P 500 by 16.5% and the Nasdaq by 25%.
Over in Asia stocks were mixed on Thursday, with the Nikkei (^N225) up 2.3% on the day in Tokyo, as other key markets lagged.
The index was helped by data showing that the Japanese economy had performed better than expected in the second quarter.