Pound Slides Amid UK Fiscal Concerns

(RTTNews) - The British pound weakened against other major currencies in the European session on Wednesday, as investors expect that UK Chancellor of the Exchequer Rachel Reeves will have to make tough decisions over where to raise taxes and reduce spending in the approaching Autumn Budget.

Reeves is anticipated to increase taxes in her November 26 budget, possibly announcing increased taxes on house ownership or real estate sales.

Markets also expects the Bank of England (BoE) is likely to cut interest rates by 25 basis points (bps) to 3.75 percent at its monetary policy meeting next week, due to the softening labor market.

Investors mostly react to corporate earnings announcements and await the Federal Reserve's interest rate decision due later in the day. The European Central Bank is scheduled to announce its monetary policy on Thursday.

Investors anticipate that the Fed will lower interest rates by 25 basis points, to between 3.75% and 4.00%.

Investors are also looking ahead to the meeting of U.S. President Donald Trump and Chinese President Xi Jinping, scheduled to take place tomorrow.

In other economic news, data from the Bank of England showed that the U.K. net consumer borrowing increased by 1.491 billion pounds ($2.00 billion) in September, which was about in line with the 1.5 billion-pound.

The increase brought the annual rate of consumer credit growth to 7.3% from 7.2% in August, the greatest level of growth since October 2024, while being somewhat lower than the 1.749-billion-pound increase in August.

In the European trading today, the pound declined to a 3-year low of 1.0502 against the Swiss franc and a 2-1/2-year low of 0.8805 against the euro, from early highs of 1.0532 and 0.8778, respectively. If the pound extends its downtrend, it is likely to find support around 1.04 against the franc and 0.89 against the euro.

Against the U.S. dollar and the yen, the pound dropped to a 3-month low of 1.3202 and nearly a 2-week low of 201.01 from early highs of 1.3281 and 201.96, respectively. The pound may test support around 1.30 against the greenback and 197.00 against the yen.

Looking ahead, U.S. MBA mortgage approvals data, U.S. pending home sales data for September and U.S. EIA crude oil data are slated for release.

At 8:45 am ET, the Bank of Canada is set to announce its interest rate decision. The central bank is expected to keep its interest rate steady at 2.5 percent.

At 2:00 pm ET, the U.S. Federal Reserve will announce its latest interest rate decision.