The UK budget update largely conformed to expectations. The government will raise taxes and borrowing significantly but will also spend heavily on priority projects, Scotiabank’s Chief FX Strategist Shaun Osborne notes.  

GBP is trading firmer

“UK markets largely took the news in their stride. UK Gilts weakened in the budget aftermath but losses reflected the generally weaker tone of fixed income markets (where core European bonds actually performed worse).”

“UK rates markets continue to anticipate a November rate cut from the BoE but, with the budget expected to give the economy a lift relative to its prior state, expectations for a December follow up have been pared back significantly. Rate sentiment continues to weigh on Gilts today but may add to GBP underpinning in the short run at least.”

“Choppy markets yesterday have muddied the near-term outlook for the GBP. While spot is holding within its recent trading range, heavy selling pressure yesterday has left a dent in the intraday and daily charts which may stifle the week-long grind higher in Cable from the low 1.29s. Intraday support does look firm around 1.2935 but a move above 1.3043, yesterday’s high, is needed to give the pound a clearer technical lift now.”