FX.co ★ Sterling Volatile after Budget Plans

The British pound edged up slightly, stabilizing around $1.3190 on Wednesday, as markets evaluated the government's newly introduced fiscal tightening measures and the unusually early release of the Office for Budget Responsibility’s forecasts. Initially, sterling gained strength when the OBR document circulated among traders, but these gains dissipated quickly, dropping to $1.31243. This fluctuation occurred as investors scrutinized the details, which revealed that a significant portion of the planned austerity measures is deferred until later in the decade. The OBR highlighted a notable increase in the government's fiscal buffer to £22 billion, exceeding expectations. However, it also lowered UK growth forecasts, citing weaker productivity assumptions, along with anticipated increases in inflation and wage pressures. Analysts cautioned that delaying the cuts could impact the government's credibility, causing the pound to trade unpredictably during Chancellor Rachel Reeves's budget speech.