Investing.com – Sterling held near two-week lows while UK government bonds steadied on Wednesday, as Chancellor John Healey’s inaugural budget preserved fiscal rules and avoided unfunded borrowing shocks, even as broad dollar strength ahead of the Federal Reserve’s rate decision limited the currency’s upside.
Sterling traded down 0.18% at $1.3283, pulling off intraday troughs. The euro inched down to $1.1125, weighed down by the firmer dollar and ongoing fiscal frictions in France.
UK government bonds gained across the curve as fixed-income desks unwound risk premiums built up ahead of the address.
The benchmark 10-year gilt yield fell to 5.331%, while the policy-sensitive two-year yield dropped back to 4.941%, stepping down from its highest level since 2023.
The bid followed Healey’s confirmation that the Treasury retains £15 billion ($20 billion) in fiscal headroom for the 2029/30 fiscal year, matching primary dealer expectations.
While down from the £24 billion cushion projected in March due to higher sovereign debt-servicing costs, the preservation of the buffer satisfied investors that day-to-day spending would remain fully funded by revenues.
OBR lifts 2026 growth, trims 2027
The Office for Budget Responsibility (OBR) delivered a mixed growth outlook, reflecting near-term domestic resilience alongside imported external headwinds:
The watchdog upgraded 2026 GDP expansion to 1.2% from 1.1%, but slashed its 2027 forecast to 1% from 1.6%, citing the macroeconomic toll of sustained high oil and gas prices tied to Middle East hostilities. Expansion is forecast to re-accelerate to 1.6% in 2028, 1.8% in 2029, 1.7% in 2030, and 1.6% in 2031.
Firm dollar caps currency action ahead of FOMC
Broader currency pairs were anchored by the U.S. dollar, with the dollar index hovering around 102.35. A rebound in technology sentiment helped refocus currency desks on energy inflation and diverging interest rate trajectories.
The Federal Reserve concludes its policy meeting later on Wednesday, with markets pricing a 91% probability of an interest rate pause at 3.75% to 4.00%. However, an implied 80% likelihood of a December rate hike continues to underpin the greenback.
The euro remained under pressure from broad dollar demand, a sluggish bank lending backdrop, and political friction in Paris.
(Navamya A contributed reporting)
Original Article
Sterling steadies, gilts tick up following Healey’s UK Budget
Treasury yields nudge toward one-week highs; Fed decision, Big Tech earnings loom
Dollar hits 2-week high a day ahead of Fed decision, euro slips on French worries
