The British pound experienced weakening against the dollar, trading around $1.316, influenced by concerns surrounding the UK’s fiscal sustainability. Anticipation surrounding the upcoming budget announcement on November 26th, coupled with fluctuating gilt yields and evolving expectations regarding Bank of England interest rate policy, are contributing factors to this volatility.
- The British pound weakened to around $1.316.
- Concerns arose regarding the country’s fiscal sustainability.
- Chancellor Rachel Reeves is reportedly dropping plans to raise income tax.
- The Office for Budget Responsibility cut the expected fiscal shortfall from roughly £35 billion to around £20 billion.
- Reeves is expected to use threshold adjustments and changes to salary-sacrifice programs to raise revenue.
- The budget, due on November 26, faces cabinet debate over policies including exit taxes and limited liability partnerships.
- Markets pared bets on Bank of England rate cuts, with about 75% probability for a December move.
- Rising gilt yields continue to complicate the UK’s fiscal outlook.
The pound is experiencing downward pressure due to a confluence of factors. Changes in anticipated fiscal policy, indicated by potential adjustments to income tax plans, have rattled investors. Improved, but still present, fiscal shortfalls create additional uncertainty. Furthermore, the combined effect of rising gilt yields and ongoing speculation about the Bank of England’s future interest rate decisions are collectively weighing on the currency’s performance in the lead up to the budget announcement.