Pound Falls to Two-Week Low Ahead of UK Budget

The British pound remained above $1.33 a day after Finance Minister John Healey unveiled a cautious budget featuring tax and spending measures designed to support households facing what he described as “global economic storms.” Healey reaffirmed the government’s commitment to its fiscal rules, announcing tax increases on banks, gambling, savings, and landlords, alongside tighter VAT rules for online marketplaces and measures to cushion households from rising energy bills. He also said the government would use part of its fiscal buffer, now reduced to £15 billion from a previous estimate of £24 billion, to meet its main fiscal target while maintaining efforts to repair public finances despite the economic fallout from the Iran conflict. The budget did little to shift market expectations for the Bank of England’s policy meeting next week. Money markets are fully pricing in a rate hike on November 5, with a second increase also expected by February.

The British pound remained around $1.33, trading near a two-week low as investors assessed UK Chancellor John Healey’s first budget announcement. Healey reaffirmed his commitment to the government’s fiscal rules, with the Office for Budget Responsibility estimating fiscal headroom at £15 billion for the 2029–30 fiscal year, in line with expectations. Key measures include energy bill relief, higher-than-expected-to-be-lower bank taxes, tariff suspensions on more than 100 supermarket products and a 3.9% increase in minimum wages. The budget also includes an additional £20.4 billion for the National Wealth Fund and British Business Bank to support investment and 140,000 jobs. On the economic outlook, the OBR cut its 2027 GDP growth forecast to 1% from 1.6%, citing the impact of the Iran war on energy prices, while raising its 2026 projection to 1.2% from 1.1%. Borrowing and public debt forecasts were also revised higher, weighing on the fiscal outlook.

The British pound fell below $1.33 to its weakest level in two weeks as investors awaited UK Chancellor John Healey’s first budget announcement, while the US dollar strengthened ahead of the Federal Reserve’s policy decision. Healey has announced plans to abolish standing charges on gas bills from 2027, a measure aimed at easing the burden of rising energy costs on households. He is also expected to reverse plans to reduce the annual cash ISA allowance, introduced by Prime Minister Keir Starmer and Chancellor Rachel Reeves to encourage savers to invest more in financial markets. Earlier this week, reports indicated that the government was considering raising the national living wage by around 4% and introducing measures to lower electricity costs for businesses. The budget is also expected to include an additional £20.4 billion in funding for the National Wealth Fund and the British Business Bank, financed through increased borrowing.