The British pound is currently hovering just below $1.31 as traders anticipate the UK’s upcoming budget announcement on November 26th. Expectations are high that the Finance Minister will need to identify significant savings to meet fiscal obligations, and the market is sensitive to potential tax policy changes. Economic data paints a concerning picture, with high borrowing, stalled business activity, weak retail sales, and declining consumer sentiment. Despite these challenges, inflation has eased, leading to increased anticipation of a near-term interest rate cut by the Bank of England.
- The British pound is hovering just below $1.31.
- Traders are awaiting the UK’s Nov. 26 budget.
- Finance minister Rachel Reeves is expected to find tens of billions of pounds to meet her fiscal rules.
- The OBR will reportedly cut growth forecasts for 2026 and beyond.
- Borrowing is at a record high outside the pandemic.
- Business activity has stalled.
- Retail sales fell sharply.
- Consumer sentiment weakened.
- Inflation eased to 3.6% in October.
- Markets now see an 80% chance of a 25-bp rate cut in December.
The interplay of factors suggests a period of potential volatility for the British Pound. While easing inflation offers a glimmer of hope and supports the possibility of interest rate cuts, the underlying economic weakness and the pressure on the government to balance the budget could weigh on the currency. The extent to which the budget addresses these issues will likely determine the pound’s trajectory in the near term.