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2025-10-31 20:31:32
[Pound Falls to Six-Month Low as Fiscal Crisis Fuels Rate Cut Expectations] ⑴ The pound fell 0.11% against the dollar to $1.3136 on Friday, nearing its lowest level since April. ⑵ The pound fell 2.3% in October, its biggest monthly drop since July and the second-largest monthly decline this year. ⑶ The pound also fell to a two-and-a-half-year low against the euro, reflecting heightened investor concerns about the UK's fiscal outlook. ⑷ Chancellor Reeves will present her budget in late November, but her room for maneuver within her own fiscal rules is very limited. ⑸ The market widely expects she may be forced to break her campaign promises and implement tax increases to maintain fiscal stability. ⑹ UK government bonds rose sharply this month as investors bet that the Bank of England will cut interest rates sooner than expected, given stable inflation. ⑺ Money market pricing indicates a 45% probability of a 25 basis point rate cut at the Bank of England's meeting next week, a significant increase from near zero a few weeks ago. ⑻ Goldman Sachs economists changed their stance this week, now predicting a rate cut by the Bank of England, after previously holding the opposite view. (9) The dual pressures of fiscal difficulties and expectations of monetary easing have made the pound one of the worst-performing major currencies this month.
