GBP Faces Pressure Ahead of UK Autumn Budget, £20bn Fiscal Gap in Focus

Sterling remains under pressure ahead of Chancellor Reeves' crucial Autumn Budget statement scheduled for 12:30 GMT tomorrow, with markets bracing for significant fiscal policy changes. The Chancellor faces the challenging task of addressing a £20 billion hole in public finances while maintaining Labour's pledge not to raise taxes on working families. Market participants are particularly concerned about the balance between fiscal responsibility and government spending commitments, which could significantly impact UK gilt yields and sterling's trajectory. The pound has shown vulnerability in recent sessions as uncertainty builds, with GBP/USD trading near key support levels. Any signs of fiscal irresponsibility or excessive borrowing could trigger further sterling weakness, while a credible plan to address the deficit might provide some relief. Traders should prepare for heightened volatility during and after the budget announcement, with particular focus on bond market reactions that could drive currency movements.