The British Pound (GBP) has faced significant challenges recently, primarily driven by concerns over the UK’s fiscal stability. The uncertainty surrounding Chancellor Rachel Reeves's upcoming autumn budget has undermined investor confidence. Key issues include anticipated tax increases and spending cuts aimed at addressing fiscal deficits, which may contribute to a bearish outlook for the currency.
Analysts note that the GBP has encountered resistance as it trades near 90-day lows against both the USD and EUR. Currently, GBP/USD is positioned at approximately 1.3151, which is 2.1% below its 3-month average of 1.3432, while GBP/EUR sits at 1.1341, roughly 1.4% lower than its 3-month average of 1.1505. In contrast, GBP/JPY has demonstrated relative strength, trading at 202.6, which is 1.2% above its 3-month average.
The backdrop for these movements includes the perception of varying monetary policies between the Bank of England and the U.S. Federal Reserve. Recent forecasts suggested a potential rate cut in February 2026, as inflationary pressures ease, underscoring the prospect of a "bumpy landing" for the economy, as noted by BoE policymakers.
While the UK economy showed a slight growth of 0.1% in August, market sentiment remains cautious, particularly with the fiscal uncertainties looming over the November budget. As experts anticipate more clarity in the coming weeks, the GBP may continue to navigate through volatility, influenced by both domestic policies and global economic conditions.
