Market News
Sterling set for biggest four-week drop in a year before UK budget - REUTERS
LONDON (Reuters) - The pound stayed on track for its biggest four-week decline in over a year on Friday, albeit it steady on the day, as investors cling to the dollar in choppy political and macroeconomic waters.
Sterling traders are also preparing for the new Labour government's first budget on Oct. 30.
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Finance minister Rachel Reeves on Thursday confirmed she will change the measure of public debt that the government targets in next week's budget to allow for billions of pounds more in borrowing for investment, she said on Thursday.
The news pushed up gilt yields on Thursday, but did little to support the pound.
Sterling was last flat on the day at $1.2982, having traded at two-month lows on Wednesday. So far this week, it has fallen 0.5%, bringing its losses over the last four weeks to 3%, the most since September 2023.
The statement is the latest in a series of indications from Reeves about how she wants more flexibility to borrow to finance investment within the government's budget rules, but with appropriate guard rails to avoid unsettling investors.
"From a financial market perspective, this is a high-stakes budget, and one that could have big ramifications for financial markets," XTB research director Kathleen Brooks said.
