The British pound has stabilized around $1.35 after experiencing a four-day rally, its longest since August. This pause coincides with a decrease in dollar selling pressure and increased scrutiny regarding the potential effects of the upcoming UK budget on the economic climate. While the budget aims to meet fiscal targets, potential tax hikes could put pressure on the already strained economy. Meanwhile, the Bank of England’s monetary policy stance could offer support to the pound, as markets anticipate no rate cuts until 2026 due to ongoing inflationary concerns.
- The British pound steadied around $1.35 on Thursday.
- It recently experienced four consecutive days of gains, the longest streak since August.
- The UK Finance Minister will present the annual budget in eight weeks.
- The budget aims to meet fiscal targets, potentially through tax increases.
- The Bank of England kept interest rates unchanged in September.
- Markets are pricing in the next rate cut in 2026.
- The Bank of England anticipates a peak in CPI inflation at 4.0% in September.
- Persistent food price inflation and administered prices remain concerns.
The current environment suggests a mixed outlook for the British pound. While recent gains indicate positive momentum, the looming budget and potential tax increases introduce uncertainty. The Bank of England’s hawkish stance, maintaining current interest rates amid inflationary pressures, could provide underlying support for the currency. However, the persistence of food and administered price inflation could limit future upside potential.