Pound Rises As UK Chancellor Assures Fiscal Discipline

(RTTNews) - The British pound strengthened against other major currencies in the European session on Wednesday, as UK Chancellor of the Exchequer John Healey promises to finance the cost-of-living support package through increased taxes or cuts in public spending rather than further borrowing.

The fiscal package is anticipated to be "scorecard positive" in 2029-30, the last year of the current parliamentary term, according to the report, which cites sources acquainted with the UK's budget preparation. This implies that all additional discretionary expenditures would be completely covered.

Rising rates on UK sovereign securities, which have taken part in the global yield rally, may be curbed by the UK's commitment to uphold fiscal restraint before to the budget announcement on October 28. After a poor start on Tuesday, 10-year UK gilt yields increased to around 5.45%.

Investors are looking forward to Thursday's release of the August GDP figures. After growing at a rate of 0.4% in July, the UK economy is predicted to have shrank by 0.1%. Investors will also pay attention to the August Manufacturing and Industrial Production figures.

The Bank of England (BoE) is expected to raise interest rates for the first time this year at its November meeting, according to traders.

Megan Greene, a BoE policymaker, has also pushed for an increase in interest rates, cautioning that the shock to the energy supplies could start to affect wages and prices more broadly. European stocks traded higher as investors cheered strong results from ASML and awaited the release of U.S. CPI data later in the day for additional clues on the Federal Reserve's rate trajectory.

New York Fed President John Williams said on Tuesday he believes it might be appropriate to raise interest rates one more time this year, but there is no need for further tightening in 2027.

Fed Governor Christopher Waller noted that the surge in U.S. Treasury yields to 24-year highs is driven by stronger economic growth and AI investment, adding that inflation expectations remain well anchored.

In the European trading today, the pound rose to near 1-1/2-year high of 0.8435 against the euro, from an early low of 0.8450. If the pound extends its uptrend, it is likely to find resistance around the 0.83 region.

Against the yen, the Swiss franc and the U.S. dollar, the pound advanced to a 3-week high of 210.26, nearly a 2-week high of 1.1062 and a 1-week high of 1.3276 from early lows of 209.84, 1.1036 and 1.3254, respectively. The pound may test resistance around 211.00 against the yen, 1.11 against the franc and 1.34 against the greenback.

Looking ahead, U.S. MBA mortgage approvals data, Canada building permits for August, U.S. CPI data for September and U.S. Fed Beige book report are slated for release in the New York session.