Weekly FX Roundup: All Eyes on the Budget as Sterling Enters a Critical Week

Lamera Capital – Market Insight Series 

Sterling enters one of its most important weeks of the year under intense pressure, with UK fiscal uncertainty, softening domestic data, and rising expectations of a December rate cut driving volatility across GBP pairs. The upcoming 26 November Autumn Budget is now the single biggest catalyst for all GBP currency pairs into month-end and markets are already positioning defensively 

Below, we break down the pound’s setup heading into the Budget, how the fiscal risk premium is affecting FX, and what the latest G10 flows tell us about the broader macro backdrop. 

 

The pound has started the week muted and vulnerable. Sterling is trading near multi-year lows against the euro and seven-month lows versus the dollar, with price action defined by two forces: 

1. Slowing UK economic momentum 

The overall picture is one of a cooling labour market, fading wage pressure, slowing domestic demand and weakening investment and this is exactly the environment in which the Bank of England becomes more willing to cut rates.
Money markets now price an 80% chance of a December rate cut, with several economists forecasting four or more cuts in 2026.
 
2. A Rising “Budget Risk Premium”
The pound is under pressure primarily because markets do not yet know what Chancellor Reeves will announce in next week’s Budget. This builds on the pattern we identified in Reality Bites, where sterling's relative strength masked deeper structural concerns.
This uncertainty has created a risk premium across all GBP pairs meaning traders are demanding a discount to hold sterling until the fiscal picture becomes clear. As we explored in our G10 Currency Outlook, this fragility extends across multiple sterling crosses.

GBP/EUR has now fallen back to levels last seen in April 2023, but importantly, not all this weakness reflects economic fundamentals.
A significant part is simply the market pricing in fiscal risk, not a structural deterioration in the UK-EU outlook.
While several major banks still argue that sterling looks undervalued on a fundamental basis, none are willing to remove that discount until the Budget is delivered.
In other words, some Major Bank's believe that GBP is cheap, but it is cheap for a reason, and that discount only disappears if the Budget is perceived as credible.

The Autumn Budget: Why It Matters for FX
The upcoming Budget is the defining market event for the UK this month. Britain’s public finances are under pressure, with the fiscal headroom almost entirely wiped out and a likely £20-25bn hole needing to be filled.
 
Markets expect a combination of:
 

Investors will react to three key areas:
1. Borrowing and credibility
If borrowing projections rise or spending cuts look unrealistic, it’s likely gilts will sell off and the pound will weaken.
2. Growth and productivity assumptions
If the OBR’s revisions are harsh, it implies weaker long-term UK potential growth. Negative for GBP.
3. The Bank of England reaction
A “tax-heavy, growth-light” Budget may push the MPC further toward easing.
A “leaner, credible” Budget may temper rate-cut expectations and support GBP.

GBP/EUR - Pressure Now, Relief Rally Later?
GBP/EUR has drifted to multi year lows trading in one of it’s weakest ranges in over two years. The pair's decline from strength earlier in October has been swift, as France's political situation stabilised and UK fiscal concerns intensified.
 
Technicals show:
 

Fundamentals show:
 

 
GBP/USD - UK Fragility Meets Dollar Stability
The dollar is supported by:
 

Without a positive UK catalyst, GBP/USD remains at risk of another leg down.
 
 GBP/CHF - The Most Vulnerable Sterling Cross
GBP/CHF has slipped below 1.06, a multi-year low.
 
The franc is the strongest G10 currency, supported by:
 

Even modest GBP softness is amplified here.
GBP/CHF remains one of the most fragile sterling crosses heading into the Budget.
 
Broader G10 Rundown

For readers wanting deeper context on how these G10 currencies interact and what drives their movements, our comprehensive guide provides essential background.

EUR - Improving Data, Steady PMI, Better Fiscal Outlook
Eurozone inflation trending to 2%, modest stimulus from Germany, and stable PMIs provide a firmer footing for the euro.

USD - Safe Haven Bid Still Intact
Hawkish repricing and global equity weakness keep USD supported. Markets await payrolls.

CHF - Structural Outperformer
Best-performing G10 currency, and likely to stay so while UK and global risks remain elevated.

JPY - Intervention Risk Rising
Weak yen continues, despite verbal warnings. Fiscal expansion delays BoJ tightening.

AUD - Well-supported into Year-End
Strong labour data, China improvement, and stable RBA positioning help AUD.

NZD - Soft-landing Narrative Strengthens
Improving PMIs reduce the likelihood of aggressive RBNZ cuts.

CAD - Firm but Range-Bound
Inflation above target keeps BoC cautious. CAD remains stable.

What This Means for UK Businesses and HNW Investors
Volatility will intensify heading into the Budget. As highlighted in our analysis of safe-haven flows, defensive positioning has increased sharply during periods of UK policy uncertainty.
 
For corporates and private clients, the key drivers now are:
 

Until the fiscal path is clear, sterling will behave like a currency prone to brief rallies but fragile underlying structure.
 
A credible Budget may deliver a short relief rally.
A messy, tax-heavy, growth-negative Budget could trigger another leg lower.

Lamera View
Sterling is fragile and lacking upside potential.
GBP is caught between:
 

Our base case:
A volatile week, with a bias toward marginal downside heading into the Budget 
Has the market already priced in as much Sterling weakness as we can expect? Maybe - GBP/EUR began the year near 1.20 so we may be approaching the point where further selling becomes harder to justify without a fresh negative catalyst. 

That said, the balance of risks still leans against the pound for now. The UK’s macro backdrop is soft, policy expectations are shifting dovishly, and fiscal uncertainty remains the dominant driver heading into 26th November. 

A relief rebound is possible if markets judge the Budget as credible. But as things stand, caution is warranted: the odds are not yet in sterling’s favour.