Pound on edge as markets braces for Reeves’ budget showdown.

Key Insights:

➢US dollar on back foot after soft economic data.

➢ Retail sales ground to a halt in month prior to shutdown.

➢ UK Autumn Budget to be unveiled this afternoon.

➢ Fresh tax hikes coming, but devil will be in the details.

➢ GBP could suffer amid large hikes to spending.

➢ Ukraine peace talks moving forward

 Market Recap:

Market sentiment turned cautious yesterday as the USD slipped following weaker-than-expected U.S. consumer confidence and ADP employment data. The EUR found support amid reports of progress toward a potential Russia-Ukraine peace agreement, while GBP outperformed as traders scaled back short positions ahead of today’s highly anticipated UK budget.

In U.S. policy news, Kevin Hassett is reportedly the frontrunner for the next Federal Reserve Chair. Markets view him as relatively dovish, pushing 10-year Treasury yields below 4%. His potential appointment has revived debate over the Fed’s independence and could add medium-term pressure on the dollar.

Elsewhere, the RBNZ delivered a 25bp rate cut—fully priced in by markets—but paired the move with hawkish messaging, suggesting the easing cycle may be nearing its end. Meanwhile, Australian inflation surprised to the upside, with CPI rising 3.8% versus the 3.6% expected, reinforcing concerns that price pressures remain sticky.

Today's Market Watch:

Today’s Autumn Budget could be a make-or-break moment for the Labour government, and UK financial markets for that matter.

There is almost unprecedented uncertainty surrounding today’s budget announcement. Chancellor Reeves has a mammoth task on her hands as she attempts to convey to markets that she has a credible strategy to both boost growth and plug the hole in the public coffers. Fresh tax increases are inevitable, but the devil will be in the details, and markets will punish the government if it lacks a plan to restore fiscal equilibrium, while simultaneously promoting growth in the UK economy.

There is also the matter of Bank of England rate expectations to consider, as any fiscal plans deemed to be anti-growth would likely elicit a more aggressive easing response from the MPC, which would no doubt exacerbate any move in sterling. At any rate, we are bracing for some curveballs, with investors on high alert for any unexpected tax hikes or spending increases.

Elsewhere, the dollar was on the back foot on Tuesday following the release of some soft US economic figures, which have raised the likelihood of another Fed cut in December. A handful of ECB member speeches are on the docket in the coming days, but these are unlikely to rock the boat too much.

26th November 2025

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