FX.co ★ Sterling Weakens to 7-Month Low

The British pound has declined close to $1.310, marking its weakest point since April. This drop followed Chancellor Rachel Reeves' address, which hinted at forthcoming tax increases. Meanwhile, investors are on edge as they anticipate the Bank of England's meeting this Thursday. Interestingly, market expectations now suggest there is approximately a 33% chance of the central bank enacting a 25-basis-point rate cut, a significant rise from near zero not long ago, driven by softer inflation figures and other weak economic indicators. The likelihood of a rate cut by December has also increased to 67%. As Chancellor Reeves prepares to present her budget on November 26, she remarked on the “years of economic mismanagement” the UK has faced and emphasized that maintaining fiscal discipline will be crucial to her strategy. She assured stakeholders with a firm commitment to fiscal rules, aiming to alleviate investor concerns regarding the fiscal deficit. These statements have bolstered expectations that fiscal policy will tighten, despite the potential for easing monetary policy, putting additional pressure on the pound before the Bank of England's highly anticipated rate announcement.