GBP resilient amid budget scrutiny – DBS

The Pound Sterling (GBP) shrugged off Autumn Budget worries, supported by orderly gilt markets and cautious OBR growth forecasts. Softening US Dollar (USD) and Fed-cut expectations continue to drive GBP gains, DBS' Senior FX Strategist Philip Wee notes.

USD weakness boosts GBP

"GBP has been remarkably resilient, brushing aside both the Autumn Budget and criticism over Chancellor Rachel Reeves’ credibility. Markets have concluded that fears of fiscal slippage were overstated. The OBR’s cautious growth assumptions, the lack of any 'mini-budget-style' surprises, and the government’s commitment to tightening day-to-day spending have kept Gilt markets orderly."

"More importantly, FX action shows that Fed-cut expectations are exerting a far stronger effect than the Bank of England’s easing prospects. The markets judged that the Autumn Budget concerns were not significant enough to outweigh the softening USD narrative. Yesterday’s 1.1% rally took GBP/USD back to late-October levels at to 1.3353."