Sterling (GBPUSD=X) wobbled after chancellor Rachel Reeves’ autumn budget, as she sidestepped a repeat of the chaos caused by her predecessor Kwasi Kwarteng during the mini-budget two years ago.
As Reeves delivered her maiden budget, the pound fell around 0.5% against the dollar to around $1.2950 before heading slightly higher after the speech. It ended the session flat.
Meanwhile, sterling fell 0.4% against the euro as France’s economy grew by more than expected in the third quarter and Germany narrowly avoided a recession.
Chris Weston, strategist at Pepperstone, said Wednesday’s budget is being taken more seriously by traders than usual.
He said: “It’s budget day in the UK, and while these events rarely pose the sort of risks to price action that warrants real focus on positioning, this one is different.
Read more: Budget 2024 live: Rachel Reeves to make major tax, spending and debt announcement
“It is seen by some as a generational budget, that will define chancellor Reeves’s career and could significantly impact Keir Starmer’s public approval rating, which has been shot to pieces of late.”
Traders have been hedging against swings in the value of the pound, with one-week implied options volatility — which measure the demand for protection against large moves in the pound over the coming week — rising to 10.375%.
“The pound’s one-week implied volatility is at its highest since March last year, which suggests traders are a little anxious about the budget. But we won’t get to 40-year lows,” Neil Wilson, chief market analyst at Finalto, said.
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In September 2022, sterling tumbled against the dollar to below $1.09, hitting its lowest point since 1985, after Kwarteng unveiled a £45bn debt-financed tax-cutting package that sparked a historic increase in borrowing costs.
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