Pound Uplift After UK Budget Shake-Up

The British pound strengthened following a new tax-and-spend budget announcement by UK Finance Minister Rachel Reeves. The budget, featuring the largest tax hikes in decades, raised concerns about inflation and altered market expectations for future Bank of England interest rate cuts.

On Thursday, the British pound gained ground after UK Finance Minister Rachel Reeves revealed a significant tax-and-spend budget. This announcement has sparked concerns over potential inflation and tempered expectations regarding future interest rate cuts from the Bank of England.

Following a 0.4% dip the previous day, Sterling rose 0.2% to $1.29870 and made slight gains against the euro. The budget unveiled by Reeves encompasses the most substantial tax increases since 1993, aiming to bolster Britain's public services and modify fiscal rules to encourage long-term investment for economic growth.

The Office for Budget Responsibility has revised its inflation forecast to 2.6% for next year, up from 1.5%. Markets now predict an 80% probability of a 25 basis point rate cut by the BoE in November, with projections for fewer than four rate cuts in the coming year, down from almost five.

(With inputs from agencies.)