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 – On course for Warsh?
Charles Porter
Thu 19 Mar 2026
On course for Warsh? The latest Federal Reserve decision concluded last night. Mirroring the prior decision, the FOMC voted to keep policy rates on hold within a band of 3.5-3.75%. Ordinarily, yesterday’s meeting could have been a lesser-event. After all, with the arrival of Chair Jay Powell’s successor on May 15th, this could have been […]
Daily Brief – Sticky forecasts?
Charles Porter
Thu 26 Mar 2026
Sticky forecasts? One theme from the early days of this conflict in the Middle East was complacent pricing. Markets still saw the knee-jerk reaction of a flight to safety and a rotation away from risk, but it was on a small scale. Markets didn’t crash per se, they slumped. Even energy markets, which have arguably […]
Daily Brief – Questioning Truth
Charles Porter
Tue 24 Mar 2026
Questioning Truth Adopting the same handle as his now rather redundant X account, @realDonaldTrump shocked markets yesterday using his own social media platform, Truth Social. During Trump 1.0, the legitimacy of a President using an unofficial X, then Twitter, account was questioned. Now under Trump 2.0, it’s seldom questioned when he is the majority shareholder […]
