GBPUSD Fundamental Analysis
Bloomberg—The British pound stayed slightly under $1.31 as traders waited for the UK’s Nov. 26 budget. Finance minister Rachel Reeves is expected to find large amounts of money to meet her fiscal goals. However, reports suggesting she might avoid raising taxes caused brief market worries.
At the same time, the OBR is set to lower its growth outlook for 2026 and the years after, which could leave a £20–30 billion gap in public finances. This adds more pressure on the government to consider tax increases.
Recent figures highlight the challenge ahead. Government borrowing is at its highest level outside the pandemic, business activity has slowed, retail sales dropped sharply, and consumer confidence weakened.
On the positive side, inflation fell to 3.6% in October. As a result, expectations for a Bank of England rate cut have grown. Markets now estimate an 80% chance of a 25-basis-point cut in December.