City calls for calm ahead of Osborne's new forex rules

George Osborne will deliver his budget at 12.30pm (Getty)

City watchers have reacted cautiously to George Osborne’s plans to tighten controls on the £3 trillion-a-day foreign exchange market due to be unveiled at the Mansion House dinner tonight

Gerard Lyons, economic adviser to the Mayor of London, pointed out that the UK dominates trading in forex with a 40 per cent market share against 19 per cent in New York.

He cautioned against too much regulation saying: “In recent years, the regulatory pendulum swung from one extreme of light regulation before the crisis and now continues to head towards the other extreme. We need global rules but it is vital London keeps its own house in order.”

Ed Parker, co-head of derivatives at international law firm Mayer Brown, said: “It’s a tightrope: too strong regulation, and business may fly to easier climes; and too light, and a loss of market confidence may be just as harmful.”

Andrea Leadsom, pictured, economic secretary to the Treasury, said: “There have been some very serious allegations made about manipulation of foreign exchange and other markets. There is a small number of people who need to understand that rigging is not acceptable.”