"Chancellor Reeves faces a £20-30 billion shortfall in the public finances, and with few easy options, investors are preparing for a new round of austerity which is focused on tax rises rather than spending restraint. Economic indicators are already flashing warning signs: unemployment has risen to a post-pandemic high of 5%, and growth momentum is fading. Against this backdrop, the pound's next move will depend on whether the Budget restores confidence in the UK's fiscal trajectory, or deepens fears of stagnation."
"This year's pre-Budget season has been unusually leaky, with a steady drip of potential measures floated in the media - from manifesto breaking hikes to income tax, to soak-the-rich mansion taxes, to fundamental changes in the country's energy policy. Markets suspect this is deliberate expectation management by the Treasury. It is a way to gauge public and political reaction before finalising the package, and to soften the ground for unpopular announcements."
Sterling is trading near a seven-month low against the dollar as markets anticipate a pivotal UK Budget. Chancellor Reeves faces a £20–30 billion public finances shortfall, prompting investors to expect tax-focused austerity rather than spending cuts. Unemployment has risen to a post-pandemic high of 5%, and growth momentum is fading. The pre-Budget period has seen many measures leaked, including income tax hikes, mansion taxes and energy policy changes, which markets view as Treasury expectation management. Leaks can reduce surprise risks but also signal indecision. The Budget will act as a credibility test; its reception will determine sterling's direction.
Read at London Business News | Londonlovesbusiness.com
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