The British pound has experienced a recent surge, exceeding $1.325, reaching levels unseen since late October. This increase builds upon a previous week’s gain and is largely attributed to a weakened US dollar amidst risk-off sentiment that has surprisingly failed to bolster the dollar. Markets are interpreting the UK’s recent budget and are awaiting US economic data for further indications about the future of global interest rates.
- The British pound rose above $1.325, the highest level since October 28.
- The rise extended last week’s 1% gain.
- The US dollar slid against all major peers.
- Risk-off sentiment failed to boost the US dollar.
- Markets are digesting the UK’s November budget.
- Chancellor Reeves defended the budget amidst criticism.
- Prime Minister Starmer supported the budget, citing “necessary choices.”
- The Bank of England is expected to deliver a 25 bp rate cut in December.
- The Bank of England is expected to pause rate cuts due to inflation risks.
- US markets fully price in a third Fed rate cut in December.
- US markets anticipate at least two more Fed rate cuts next year.
The asset has demonstrated resilience, benefiting from a confluence of factors that include a relatively stronger domestic economic outlook compared to that of the United States. While domestic policy decisions are being debated, anticipated monetary policy divergence between the UK and the US is playing a significant role in shaping the asset’s current trajectory. The asset’s strength is also tied to external factors, namely the weaknesses of its peers, particularly the US dollar.