#uk-budget

#uk-budget

Post-Budget, gilt markets seem reasonably quiet though we have seen a slight tick-up in yields this morning after declining yesterday. Sterling trades at its best in a month against the dollar, though has come back off the overnight highs this morning to $1.3223. EURGBP has seen less of a move as it ran up against the 50-day SMA support, a three-week high for the pound.

Rarely has the buildup to a budget seemed so chaotic. Westminster has been full of stories about confidential briefings and screeching U-turns for weeks. Then came an unprecedented leak by the Office for Budget Responsibility, publishing the full budget online hours before the chancellor stood up at the dispatch box.

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Ask any economist or policy wonk and they'll tell you the buildup to this year's budget has been among the most drawn-out and chaotic they can remember. Treasury insiders are adamant they have maintained the same Labour values throughout and that Reeves first scribbled down her top three priorities the NHS, the cost of living and the public debt as long ago as July.

Sales volumes fell by 1.1%, the first contraction in three months and significantly worse than the flat reading economists had expected. The Office for National Statistics (ONS) said the drop was partly driven by shoppers intentionally holding off on spending until this month's major discount events. Grant Fitzner, ONS chief economist, said many consumers reported waiting for Black Friday deals, which begin next week.

"Research from Microsoft suggests AI represents a £550 billion opportunity for the UK over the next decade," she said.

The latest figures from the Office for National Statistics (ONS) show inflation slipping from 3.8% in September, though the fall was not as sharp as economists had forecast. The reduction strengthens hopes that price pressures have peaked and could pave the way for future interest rate cuts, even as inflation remains above the Bank of England's 2% target.

Chancellor Reeves faces a £20-30 billion shortfall in the public finances, and with few easy options, investors are preparing for a new round of austerity which is focused on tax rises rather than spending restraint. Economic indicators are already flashing warning signs: unemployment has risen to a post-pandemic high of 5%, and growth momentum is fading. Against this backdrop, the pound's next move will depend on whether the Budget restores confidence in the UK's fiscal trajectory, or deepens fears of stagnation.