Skip to content GBPUSD Hits New Low as New Budget Shakes Markets
The GBP/USD currency pair dropped to a new low of $1.284, its weakest point since mid-August, due to worries about the new Labour government’s budget plans. On the day the budget was announced, the pound experienced fluctuating prices but eventually fell. This decline happened as market participants evaluated several key factors:
- The government plans to increase its borrowing by £28 billion annually during its term.
- This fiscal year will see £297 billion in bond issuances, the second-highest amount in history.
- Tax increases totaling £40 billion are expected to enhance funding for public services and cover a £22 billion deficit left by the former government.
Bank of England Set to Cut Rates Amid Revised Growth Forecast
Moreover, the Office for Budget Responsibility has updated its economic outlook, forecasting GDP growth to hit 1.1% this year. However, the growth estimate for 2025 has been revised to 2%. Inflation rates are predicted to be around 2.5% in 2024, with a slight rise to 2.6% the following year.
Despite these projections, the Bank of England is anticipated to cut borrowing rates by 25 basis points next week. Market expectations have shifted, now predicting three quarter-point rate reductions by the end of 2025, down from the previous expectation of five cuts.
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