GBP/USD hits seven-month low as UK fiscal concerns deepen ahead of BoE decision

• GBP/USD falls to a seven-month low amid renewed US Dollar strength and UK fiscal concerns.
• UK Chancellor Rachel Reeves signals “hard choices” ahead of the November 26 budget, including possible tax increases.
• Focus in the US shifts to the ADP Employment Change report as the government shutdown delays official data.

The British Pound (GBP) remains under pressure against the US Dollar (USD) on Tuesday, with GBP/USD falling to its lowest level since April 11 amid broad-based Greenback strength and growing fiscal concerns in the United Kingdom (UK). At the time of writing, the pair is trading around 1.3047, down nearly 0.7% on the day.

The US Dollar Index (DXY), which measures the Greenback’s performance against a basket of six major currencies, remains resilient, extending its winning streak for a fifth consecutive session to trade near 100.08, marking a fresh three-month high amid waning expectations of a December interest rate cut by the Federal Reserve (Fed).

Sterling came under broad selling pressure after UK Chancellor Rachel Reeves used a rare pre-budget address to prepare the public for “hard choices” ahead of the November 26 fiscal announcement. Reeves emphasized the need to bring public debt under control, refused to rule out tax increases, and outlined plans for business-rate reform aimed at supporting local firms. She framed her upcoming budget as one for “growth with fairness,” stressing that fiscal decisions will be focused on lowering inflation.

Reports also suggest that the government is considering a 20% “settling-up” tax on the assets of people emigrating from the UK, which could raise about £2 billion annually and apply to the sale of assets such as company shares.

Meanwhile, attention now turns to the Bank of England (BoE) interest rate decision on Thursday, where investors largely expect the central bank to hold the Bank Rate at 4.00%. With inflation still hovering around 3.8%, well above the BoE’s 2% target, policymakers are expected to retain a cautious stance.

According to the latest BHH Market View report, the expected fiscal drag should leave room for the BoE to deliver more easing than currently priced in, around 50-basis-points (bps) over the next 12 months, which could further weigh on the Pound. The swaps market currently implies about 30% odds of a 25 bps rate cut to 3.75% at this meeting.

In the United States, attention turns to the ADP Employment Change report due on Wednesday, which will provide an early indication of private-sector hiring trends. With the ongoing US government shutdown delaying official labor market releases, traders are relying on the private payroll data to gauge employment momentum and reassess the likelihood of another interest rate cut later this year.