Sterling Falls to 2-Week Low
The British pound depreciated to $1.336, marking a two-week low, as it faced pressure from a strengthening dollar and apprehensions surrounding the UK's forthcoming November budget announcement. Market participants are cautious that potential tax increases needed to achieve fiscal objectives may further strain an already delicate economy and currency. Finance Minister Rachel Reeves, set to present her budget on November 26, is anticipated to prioritize fiscal prudence, potentially through tax hikes, reminiscent of her previous strategy that generated £25 billion from heightened employer social contributions. Analysts forecast modest economic growth for the UK throughout the remainder of 2025, with inflation anticipated to climb to 4%, which is twice the Bank of England’s (BoE) target. Market expectations are for the next BoE rate cut to occur in April next year, with a total of two cuts anticipated by the close of 2026. BoE Chief Economist Huw Pill emphasized the importance of "conservative central banking," advocating for prioritizing inflation management over interventions aimed at economic growth, thereby opposing suggestions for a collaborative initiative between the government and BoE to stimulate investment.
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