British Pound Vs USD Falls as Markets Anticipate UK Tax Hike
The British pound – GBP/USD – dropped to $1.33, its lowest in 9 weeks, according to forex market data tracked on Thursday. The exchange rate remained in a tight range as traders continued to focus on the ongoing US government shutdown. It pulled back to a low of 1.3300, down from the September high of 1.3725.
Over the past 4 weeks, the cable – British pound vs the US dollar – has lost 1.8%, and in the last 12 months, it increased 1.75%. The pound fell significantly during the early hours, but it looks like the 1.33 level is going to continue to offer a bit of support with the current market sentiment.
Sterling also lost ground against the euro and the yen as investors took a breather after a four-day rising streak. It also eased 0.05% to 86.82 pence per euro. The pound hit 86.57 pence on Wednesday, the strongest since September 16.
GBP fell 0.35% to 204.20 versus the yen on Thursday, having touched a 15-month high of 205.08 the day before. Bank of England Chief Economist Huw Pill cautioned against trying to solve all of Britain’s economic challenges through monetary policy, urging “conservative central banking” focused on inflation control.
His remarks counter calls for greater coordination between the BoE and government, as borrowing costs climb and fiscal pressures mount. Meanwhile, the UK 10-year gilt yield was little changed at 4.73%, reflecting investor caution ahead of next month’s budget and growing concerns over debt sustainability.
Finance Minister Rachel Reeves faces a tough balancing act as she seeks to meet fiscal targets while avoiding measures that could stifle growth. Markets expect Reeves to raise taxes again, after her first budget increased employer social contributions by £25 billion.
Analysts forecast modest growth through year-end but see inflation rising to 4%, twice the BoE’s target. Markets are pricing in two BoE rate cuts next year, with the first not expected until April. Naira Rallies to N1466/$ as Foreign Reserves Reach $42.574bn
