If you’ve been watching Sterling wobble over the past few weeks, you’re not alone. The British pound is having trouble sustaining any bullish demand as traders wait nervously for one thing:
The “Wicked: For Good” movie release. Just kidding.
I’m talking about Chancellor Rachel Reeves’s Autumn Budget on November 26!
This isn’t just another routine fiscal announcement. With the UK economy barely growing, inflation stuck at 3.8% (almost double the Bank of England‘s target), and a £20-30 billion hole in the public finances, Reeves faces an economic tightrope act.
Whatever she announces could shape interest rate expectations, influence BOE policy, and drive significant moves in the pound over the coming weeks.
No pressure.
Here’s what beginner traders need to know about this crucial event and what to watch for as Budget Day approaches:
The Basics: What’s Happening?
On Wednesday, November 26, 2025, U.K. Chancellor of the Exchequer Rachel Reeves will deliver the government’s Autumn Budget to Parliament around 12:30 PM GMT.
This is the Labour Party’s second budget since winning the 2024 election and represents the UK government’s sole major fiscal event for the year.
What Is a Budget?
A budget is when the government announces its tax and spending plans. Think of it as the government’s financial roadmap—where money comes from (taxes) and where it goes (public services, infrastructure, benefits).
For markets, budgets matter because they affect economic growth, inflation, and ultimately central bank policy.
The Current Situation
Reeves inherited a challenging economic picture. Government borrowing costs are at multi-decade highs, the UK economy grew just 0.1% in the third quarter of 2025, and inflation remains stubbornly above target.
According to the Office for Budget Responsibility (OBR), there’s only a 54% probability the government will meet its fiscal target of balancing day-to-day spending with tax revenues by 2030. Yipes!
To plug the estimated £20-30 billion fiscal gap, Reeves must either raise taxes, cut spending, or find creative ways to boost growth.
But here’s the problem: during the election campaign, Labour pledged not to raise the three main taxes that affect “working people”—income tax, National Insurance (NI), and Value Added Tax (VAT).
Recent reports suggest Reeves may announce:
- Capital gains tax increases: Raising revenue from wealthier taxpayers
- Inheritance tax changes: Including potential reforms to agricultural property relief
- Pension tax adjustments: Possible limits on tax-free withdrawals
- Fuel duty restoration: Removing the temporary 5p per liter reduction (worth £2.7 billion annually)
- Income tax threshold freezes: Extending the freeze through 2030, pulling more people into higher tax bands (worth ~£7 billion annually)
Notably, there’s been a dramatic U-turn in recent days. Earlier speculation about a 2% income tax increase—which would have been the first in 50 years—appears to have been scrapped after better-than-expected forecasts from the OBR showed the fiscal hole might be closer to £20 billion rather than £35 billion.
Why It Matters: The Triple Threat For The British Pound
Next week’s Autumn Budget announcement can influence Sterling demand in three ways:
Growth Impact
Tax increases of this scale will hurt economic growth. The UK economy already expanded just 0.1% in August (after contracting 0.1% in July), and unemployment has climbed to 5.0%.
More taxes mean less consumer spending and business investment, which could push the UK toward recession.
BOE Rate Cut Expectations
Remember that fiscal policy shapes monetary policy expectations.
The BOE held rates at 4% in November in a narrow 5-4 vote, with Governor Andrew Bailey signaling that policy is now on a “gradual downward path.” Markets price a 60% to 65% chance of a December 18 cut to 3.75%.
If Reeves unveils heavy tax hikes that slow the economy, the BOE could respond with faster rate cuts to cushion growth.
But if the Budget manages to support growth without stoking inflation, the currency could firm on expectations of a more gradual easing path.
Fiscal Credibility
UK borrowing costs have climbed sharply this year, signaling growing investor concern about the country’s fiscal position.
If the November 26 Budget fails to credibly address the £20 to £30 billion gap, gilt yields could spike again and put fresh pressure on Sterling, especially with memories of the 2022 mini budget still lingering.
Reeves needs to raise enough revenue to reassure markets without hurting growth, and the OBR’s independent forecasts help—but its latest estimate gives only a 54% chance of meeting fiscal rules. Any measures that worsen that outlook could trigger renewed GBP selling.
What to Watch: The Critical Calendar
Here are the key dates between now and the Bank of England’s next rate decision that could influence Sterling:
November 19: October Inflation
Forecast CPI at 3.6 to 3.7%. Sticky inflation limits BOE room to cut and supports GBP. A print above 3.9% slashes December cut odds.
November 26: Autumn Budget
- Key focus: size of tax package, which taxes rise, and OBR growth or deficit forecasts.
- Best for GBP: modest, credible tax hikes with upbeat OBR numbers.
- Worst for GBP: heavy tax hikes or fiscal rule breaches that damage growth.
December 10: November Jobs
Unemployment near 5.0%, wage growth around 4.4%. A rise in jobless numbers or wage growth dipping below 4% boosts chances of a December cut.
December 16: November Inflation
Final input before the December 18 meeting. A print above 3.8% could push the BoE to hold.
December 18: BOE Policy Decision
Market pricing sees a 25bp cut to 3.75%. Watch the vote split and Bailey’s tone on whether cuts stay “gradual” or speed up.
The Bottom Line
The November 26 UK Budget is a major pressure point for Sterling traders. Rachel Reeves has to plug a £20-30 billion fiscal gap, stick to her campaign promises, and avoid tightening policy so much that she knocks the economy into recession.
For GBP, the stakes are simple: the Budget will reset expectations for BOE’s policies.
Large tax increases in the £40-50 billion range would likely drag on growth and push traders toward pricing deeper rate cuts through 2026, which would weigh on Sterling.
Smaller tax rises around £20-25 billion would be seen as less damaging. That could lift the Pound as traders shift toward a slower, more measured rate cut path.
The composition matters just as much as the size. Taxes on businesses and higher earners hit the economy differently than those on average workers, so markets will dig into the fine print.
The real verdict comes from the data. The Budget sets the tone, but upcoming releases—UK inflation on November 20, jobs on December 10, and CPI on December 16—will ultimately shape expectations for the December 18 BOE meeting.
Trade it wisely. Budget day can spark fast, messy moves. Use tight risk controls or simply stay flat until volatility cools.
Once this major uncertainty clears, Sterling may pick a direction. Everything now hinges on what Reeves puts in that red box on November 26.
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