FX.co ★ Sterling Little Changed Ahead of Budget

The British pound remained just below the $1.31 mark as traders anticipated the United Kingdom's budget announcement on November 26. Finance Minister Rachel Reeves is expected to identify tens of billions of pounds to adhere to her fiscal policies, and rumors of potentially circumventing tax increases caused temporary market fluctuations. The Office for Budget Responsibility (OBR) is expected to lower growth forecasts for 2026 and beyond, which will likely increase the financial shortfall by £20-30 billion and heighten the likelihood of tax increases. Current economic data highlights the predicament: borrowing levels have reached record highs outside of the pandemic period, business activity has stagnated, retail sales have significantly declined, and consumer confidence has waned. In contrast, inflation decreased to 3.6% in October, reinforcing expectations that the Bank of England may reduce interest rates next month. Market analysts currently estimate an 80% probability of a 25-basis point reduction in December.