The British pound (GBP) remains under pressure amid a bleak economic outlook for the UK. Recent forecasts from KPMG suggest a sluggish GDP growth of just 1% projected for 2026, fueled by rising unemployment and diminishing consumer confidence. As a result, the pound was muted throughout yesterday’s trading session as investors reacted to the negative sentiment surrounding the UK's economic prospects.
Investor anxiety is heightened ahead of the UK's upcoming budget on November 26, with concerns over potential tax increases and anticipated cuts to interest rates from the Bank of England (BoE). This backdrop has contributed to the GBP trading near multi-month lows against major currencies. Options markets indicate a bearish outlook on the pound, with analysts stating that expectations of interest rate cuts will likely diminish its attractiveness.
In terms of recent performance, the GBP has faced significant declines against both the US dollar and the euro. As of the latest data, GBP to USD is at 1.3221, only 0.8% below its three-month average but within a moderate range. The pound has also slipped against the Euro, presently at 1.1365, reflecting a low not seen in over a week. Conversely, against the Japanese yen, the pound shows a modest strength at 205.9, slightly above its three-month average.
Recent developments, such as a projected £20 billion budget shortfall and potential revisions to productivity forecasts by the Office for Budget Responsibility, are likely to reinforce the negative sentiment surrounding the pound. With economic data scarce, the pound may continue to be directionless, awaiting clarity on fiscal policy and rates from the BoE. Analysts suggest businesses and individuals involved in international transactions should remain vigilant and consider hedging strategies as volatility persists in the currency markets.
