FX.co ★ British Pound Weakens on Inflation, Spring Budget

The British pound fell below $1.29, reaching its lowest point in almost two weeks. This decline came as traders responded to a lower-than-expected inflation report for February and the announcements from the Spring Statement. According to British Finance Minister Rachel Reeves, the Office for Budget Responsibility (OBR) now anticipates UK inflation to average 3.2% in 2025, a rise from the 2.6% predicted in October. In contrast, the OBR has downgraded its 2025 economic growth forecast to 1% from the previous 2%. Additionally, it has projected that public sector net borrowing will decrease from £137.3 billion (4.8% of GDP) this fiscal year to £74.0 billion (2.1% of GDP) by the 2029-30 timeline. Notably, this represents an increase of £12.1 billion (0.4% of GDP) in borrowing for 2025-26 compared to the projections made in October. The government introduced several policy revisions, which include welfare reforms, cuts to departmental budgets, and a modest set of tax adjustments. February's annual inflation rate in the UK dropped to 2.8%, slightly below the anticipated 2.9%, aligning with the Bank of England's expectations.