The British pound has strengthened, surpassing $1.325, reaching its highest level since late October. This rise occurred as the US dollar weakened against major currencies, even amidst risk-off sentiment. Market participants are analyzing the UK’s recent budget and anticipating upcoming US economic data for insights into future interest rate decisions.
- The British pound rose above $1.325, its strongest level since October 28.
- Last week the British pound saw a 1% gain.
- The US dollar slid against all major peers.
- Markets are digesting the UK’s November budget.
- Chancellor Rachel Reeves defended her budget amid criticism.
- Prime Minister Keir Starmer argued “necessary choices” were required to avoid additional borrowing.
- The Bank of England is expected to deliver a 25 bp rate cut in December, before pausing.
- US markets fully price in a third Fed rate cut in December and at least two more reductions next year.
This indicates a positive short-term outlook for the British pound, supported by both domestic fiscal policy discussions and expectations of divergent monetary policies between the UK and the US. The pound’s strength is further fueled by a weakening dollar. However, the Bank of England’s anticipated pause in rate cuts after December introduces potential uncertainty and could impact the pound’s trajectory depending on future inflation trends.