The British pound (GBP) continues to face downward pressure, trading at levels not seen in months against major currencies due to increasing budget-related uncertainties and emerging concerns over the UK’s fiscal outlook. As of recent reports, GBP/USD is at 1.3146, which is 1.7% below its three-month average of 1.3376 and has fluctuated within a stable range of 1.3019 to 1.3646. This decline is reflective of investor caution ahead of the critical autumn budget scheduled for November 26, amid fears that it may not be well-received by markets.
Analysts highlight the potential for tax hikes within Chancellor Rachel Reeves’s upcoming budget, which could further undermine growth prospects in the UK. Additionally, the looming possibility of interest rate cuts from the Bank of England (BoE) is influencing bearish sentiment. Recent updates indicate that the GBP has weakened against both the US dollar and the euro, with GBP/EUR at 1.1352, also 1.0% below its three-month average, amidst fears over a £20 billion budget shortfall expected due to a downward revision of productivity forecasts by the Office for Budget Responsibility (OBR).
The GBP has recently reached its lowest levels against the Euro in over two years, with the euro rising to 88.10 pence. This trend has arisen as expectations grow for imminent rate cuts by the BoE, which is seen as diminishing the currency’s appeal in the international markets. Interestingly, GBP/JPY remains resilient near 204.5, marking 30-day highs and 1.6% above its three-month average, which reflects a slightly more favorable performance amidst the overall bearish outlook for the pound.
Attention now turns to the UK’s consumer price index, as a cooling inflation rate may bolster the case for cuts to interest rates, further influencing GBP's trajectory. With these developments, stakeholders in international transactions involving GBP should remain vigilant and consider hedge strategies to mitigate potential volatility stemming from ongoing fiscal uncertainties.
