It’s been another turbulent week for the Pound, as both monetary and fiscal headlines out of the UK triggered sharp market reactions. Between the Bank of England’s closely contested rate decision and Chancellor Rachel Reeves’ pre-budget speech, sentiment toward Sterling remains fragile heading into the final stretch of the year.
Bank of England Holds at 4% – But Signals Easing Ahead
On Thursday, the Bank of England voted 5–4 to keep the Bank Rate unchanged at 4%, marking one of the closest decisions in recent memory. Four members pushed for an immediate 25-basis-point cut, reflecting the Monetary Policy Committee’s growing concern that rates are now overly restrictive against a backdrop of sluggish growth.
Governor Andrew Bailey struck a notably cautious tone, acknowledging that inflation has peaked and disinflation continues, but also warning that the BoE needs “more evidence” before moving again. Markets interpreted his comments as a soft signal that rate cuts are coming, with traders now fully pricing in a move before Christmas.
The dovish hold placed short-term pressure on Sterling, as investors adjusted rate expectations lower. Gilts rallied modestly, and GBP slipped across the board, reflecting the sense that the BoE’s next move is more likely to be down than up.
Rachel Reeves’ Speech Sends Sterling Lower
Earlier in the week, Chancellor Rachel Reeves unsettled markets with a pre-budget address focused on fiscal responsibility and tough spending choices. Reeves reaffirmed the government’s commitment to “iron-clad discipline” but stopped short of ruling out tax increases, particularly for working households – a clear shift in tone from earlier campaign rhetoric.
FX traders reacted immediately. The Pound fell as much as 0.64% against the Dollar, touching its weakest level since April at $1.3056, while the Euro strengthened sharply to 87.96p – its highest in over two years. The move reflected both a reassessment of UK growth potential and a recalibration of risk appetite amid uncertainty about how far Reeves’ fiscal tightening might go.
FX Market Recap
- GBP/USD: Sterling’s downward momentum persisted through the week, with the pair sliding toward the 1.30 handle. Weak economic data, cautious BoE rhetoric, and fiscal uncertainty continue to cap rallies.
- EUR/USD: The Euro held firm above 1.15, supported by steady Eurozone sentiment and a softer Dollar tone.
- EUR/GBP: The Euro gained ground, reflecting stronger confidence in EU stability relative to UK policy risks.
Meanwhile, the US Dollar traded mostly sideways, retaining its defensive appeal as both the UK and Eurozone wrestled with policy ambiguity and uneven growth.
Looking Ahead
All eyes now turn toward the Autumn Budget on November 26th, which could be pivotal for Sterling’s direction into year-end. With the BoE divided, inflation easing, and the Chancellor signalling fiscal restraint, the UK faces a challenging balance between stabilizing growth and maintaining investor confidence.
In the near term, traders are likely to stay defensive on the Pound, with 1.30 emerging as a key support level for GBP/USD. A sustained break lower could open the door toward 1.2850, while any relief rally will depend on improved macro data or a softer tone from US policymakers.
For now, EUR and USD remain the preferred currencies for investors seeking stability, while Sterling continues to navigate a complex mix of fiscal uncertainty and monetary divergence.
GBP/EUR 1.1339 GBP/USD 1.3088 GBP/AED 4.8096
GBP/AUD 2.0204 GBP/CHF 1.0572 GBP/CAD 1.8479
GBP/NZD 2.3313 EUR/USD 1.1527 GBP/ZAR 22.7159