The British pound has climbed back above $1.325, marking its highest level since October 28. This uptick extends last week's 1% increase as the US dollar weakened against other major currencies, despite risk-off sentiment that typically boosts the dollar as a safe haven. Markets are currently absorbing the implications of the UK's November budget and are eagerly awaiting a series of US economic reports this week, which are expected to provide insights into the global interest rate trajectory.
In this context, Chancellor Rachel Reeves dismissed claims of misleading the public regarding the state of the UK’s finances before her budget declaration, particularly in light of criticism regarding the £26 billion package of tax hikes announced on Wednesday. Prime Minister Keir Starmer has backed these measures, emphasizing that "necessary choices" must be made to prevent additional borrowing. Meanwhile, the Bank of England is anticipated to implement a 25 basis point rate cut in December, after which it may pause to assess potential inflationary pressures. Conversely, US markets are fully anticipating a third Federal Reserve rate cut in December, with expectations for at least two more cuts in the following year.
