"The pound has plunged to its lowest against the euro since May 2023 as markets brace for the Budget on 26 November. While hoping lower borrowing costs and growth will help, speculation is growing that Chancellor Rachel Reeves must break Labour's pledge and raise direct taxes. Bond markets are watching nervously. Excessive borrowing could trigger 2022 mini-Budget-style turmoil. With Budget Day looming, sterling volatility will likely persist as fiscal reality clashes with political promises."
"Pound sterling exchange rates have fallen against G10 currencies consistently over the last month, but yesterday we saw GBP/EUR hit a 2-year low at 1.13 and 1.32 against the dollar - this is mainly due to the fact that analysts are now pricing in a rate cut for November/December from the Bank of England which is not good for sterling exchange rates. With the upcoming Budget and Bank of England meetings, we expect this trend to continue. UK economic weakness and uncertainty will be difficult to solve overnight, and this will reflect in exchange rates."
The pound fell to 1.13 against the euro and 1.32 against the dollar, its lowest level since May 2023. Financial experts warn the downward trend will likely continue ahead of the Chancellor's Autumn Budget on 26 November. The Office for Budget Responsibility has identified a £20 billion fiscal deficit, adding pressure to fiscal decisions. Market participants say analysts are pricing in a Bank of England rate cut in November/December, weakening sterling. Concerns persist that higher borrowing or broken tax pledges could provoke bond-market volatility similar to the 2022 mini-Budget.
Read at London Business News | Londonlovesbusiness.com
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