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The Pound Sterling (GBP) staged a relief rebound yesterday after the UK government released details of their own budget. There was initial relief amongst market participants that the Autumn Statement did not trigger a sell-off in the gilt market. The scaling back of short GBP positions built up ahead of the Autumn Statement has helped to lift cable to a high overnight of 1.3269 while EUR/GBP has dropped back to  0.8750, MUFG’s FX analyst Lee Hardman reports.  GBP rebounds as budget avoids gilt shock “The lack of any material negative policy surprises in the budget does not provide justification for a sustained reversal higher for the pound. We expect the market focus to switch back soon to the prospect of the BoE cutting rates again in December weighing on pound performance heading into year end. Yesterday’s budget did not change our forecast for the BoE to cut rates in December.” “At the margin we would argue it is supportive given the government’s policies will help to lower inflation next year and represent additional fiscal tightening. Admittedly, the tax hike measures were back-loaded so will have less impact on dampening growth in the coming years. We expect continued loosening in the UK labour market and slowing wage growth to create more room for the BoE to lower rates to 3.25% by next summer.” “The budget has been criticised for putting off making difficult decisions on the need to cut government spending, pushing back tax hike measures until closer to the next election casting doubt on whether they will be implemented as planned, and lacking clear policies to boost growth. It is viewed as more of a political exercise to appease Labour MPs and reduce pressure on the leadership of the party. The initial favourable market reaction also further helps to reduce…

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Filed under: News - @ November 27, 2025 9:26 am