GBP traded in a very tight range today. Markets were quiet, but that will not last for long. The focus now shifts to tonight’s UK Budget, which could be one of the most important policy announcements of the year.
NZD moved due to their Reserve Bank news
Here is what is expected based on the latest reporting.
What the UK Budget may include
According to early briefings, the Government is preparing a series of significant tax increases to help close a multi-billion pound fiscal gap. The Chancellor is expected to extend the freeze on income tax thresholds until at least 2028. When wages rise but tax bands do not, people end up paying more tax. This is often referred to as a “stealth tax”.
Additional measures may target:
Property investors
Pension contribution rules
Business taxation
Wealth and capital related earnings
The theme is simple. The Government needs revenue, and the Budget will likely reflect that.
Why this matters for GBP
In the short term, GBP can move sharply around Budget releases. The pound is currently holding steady against most major currencies. GBPUSD is trading around the 1.318 area.
Here are the two possible reactions:
If the Budget is viewed as credible and responsible
GBP may hold or strengthen slightly. Markets like stability and may reward a clear fiscal plan.
If the Budget raises concerns about growth
The pound may come under pressure. Higher taxes can reduce spending power and slow the economy. Investors may also expect the Bank of England to lean toward easier monetary policy in the future, which would weigh on GBP.
Who should pay attention
If you have upcoming GBP transfers or exposure, the Budget could move the market very quickly.
If you are buying GBP, a weaker pound tonight could work in your favour.
If you are selling GBP, a pre-Budget bounce might be an opportunity to secure a stronger rate.
If you want certainty, securing a rate or using a forward contract can help you avoid the volatility.
The Budget is always a key moment each year. Tonight’s release feels even more important, given the economic backdrop and the Government’s need to raise revenue.
If you want me to monitor GBP levels for you or help plan around your transfer, send me a message anytime.
GBP/USD - 1 Day Chart
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