A look ahead
The UK Pound continues to be influenced by the gilt market and fiscal concerns. Sterling has been a very expensive short this year, contributing to its relative outperformance. In fact, the few episodes of sustained weakness we have seen tended to have either coincided with a global risk-off turn or a sharp drop in UK gilt prices. As the cost of servicing public debt rises, fiscal headroom decreases, creating a stability and growth risk for the UK economy and public finances.
The Chancellor announced the date of the next UK budget (26th November) well over a month ago now. Since then, GBP has remained relatively range-bound with key pairs more often being dictated by the counter currency than Sterling itself. Investors will be likely awaiting the contents of the Autumn budget before making significant decisions with respect to UK assets. A range-bound market is likely to endure therefore.
Options markets are pricing for significant disturbance on the 26th November. However, cast your mind back to recent UK Sterling routs and we’re reminded of elongated multi-session sell-offs. The Kwarteng-Truss mini budget of 23rd September 2022 for example saw a far more severe sell-off the session after the mini-budget, not on the day itself. The premium for options expiring in the sessions following the 26th November are not dissimilar in price to those expiring on budget-day itself. The conclusion being that the market could be caught off guard by a more protracted Sterling or gilt-market tantrum.
Discussion and Analysis by Charles Porter
Related Insights
Daily Brief – Jobs Week
Charles Porter
Tue 30 Sep 2025
Jobs Week The labour market has been the key to unlocking a weaker Dollar. Despite moderating inflation and lacklustre economic activity in the US, it had been the labour market that kept the Fed wanting rates held in restrictive territory. As cracks began to appear in the labour market through revisions to prior data and […]
Daily Brief – Le sick man of Europe?
Charles Porter
Tue 7 Oct 2025
Le sick man of Europe? Over the decades, the phrase ‘sick man of Europe’ has been levied at many countries. Believe it or not, given its heralded status as the (often misfiring) engine of Europe and driver of growth, the phrase started life aimed squarely at Germany. The lesser loved UK, back when it was […]
Daily Brief – Shutdown
Charles Porter
Thu 2 Oct 2025
Shutdown With Congress failing to reach agreement on a funding deal ahead of Tuesday’s deadline, the US federal government is now in shutdown. This is not an unusual situation. So then, what is it and why does it matter to markets? Departments of the federal government deemed non-essential have been shut down. Functions of the […]
