UK data comes into focus as anticipation for the budget builds
Daily Currency Update
Sterling started the week on the back foot, still pressured by soft economic data and ongoing fiscal uncertainty - both of which have strengthened expectations of a Bank of England rate cut in December.Chancellor Reeves’ reversal on income tax increases has offered little reassurance to markets, even as the OBR lowered its deficit forecast from £35bn to £20bn. Investors now anticipate threshold changes and employment-related tax adjustments as the government’s likely path forward.
Recent consumer and business confidence surveys reflect weak underlying activity, while rising employment costs and higher tax burdens continue to weigh on sentiment as firms scale back hiring.
In the near term, GBP is expected to stay vulnerable ahead of the 26 November Budget. Upcoming CPI and PMI data could heighten volatility, with a persistent fiscal risk premium limiting GBP/USD upside and keeping EUR/GBP supported.
Key Movers
Following the government shutdown, the US economy has entered a renewed phase of interest-rate uncertainty. Expectations for a December Federal Reserve rate cut have fallen sharply - from 62% to 43% in under a week - as policymakers remain divided: some highlight labour-market softening, while others argue inflation is still too high to justify easing.In the near term, the USD is likely to stay supported as long as risk aversion persists and labour data continues to show softness or inconsistency.
The dollar also remains highly data-sensitive. Any strong rebound in payrolls, spending, or inflation could further reduce expectations of a December cut and cap additional USD downside.
Looking ahead, the medium-term path for the greenback will largely depend on December’s FOMC decision; a slower-than-expected easing cycle would keep the USD underpinned into year-end.
Expected Ranges
- GBP/USD: 1.3135 - 1.3175 ▲
- GBP/EUR: 1.1320 - 1.1360 ▲
- GBP/AUD: 2.0215 - 2.0310 ▲
- EUR/USD: 1.1575 - 1.1620 ▲