The British pound experienced a decline, falling below $1.29 to a near two-week low as market participants responded to softer-than-anticipated inflation data and the implications of the Spring Statement. Revised economic forecasts, including elevated inflation expectations and lowered growth projections, contributed to the pound’s weakness.
- The British pound slipped below $1.29, a near two-week low.
- UK inflation is expected to average 3.2% in 2025, up from 2.6% in October.
- 2025 growth forecast was lowered to 1% from 2%.
- Projected public sector net borrowing is expected to decline to £74.0 billion by 2029-30.
- Borrowing for 2025-26 is expected to be £12.1 billion higher than October estimates.
- The UK’s annual inflation rate eased to 2.8% in February.
The developments suggest a challenging economic outlook for the UK, potentially diminishing the pound’s appeal to investors. Higher future inflation combined with slower growth tends to lead to a weaker currency, as it reduces the real value of investments denominated in pounds and signals reduced economic activity, which can affect investment decisions.