Chancellor Rachel Reeves will unveil her Spring Statement on Wednesday, with expected spending cuts and downgraded growth forecasts potentially weighing on the pound (GBP).
At the time of writing, GBP/EUR is trading close to a near three-week high while GBP/USD is around a cent below the four-month high struck last week. Meanwhile, EUR/USD is a cent and a half lower than last week’s five-month high.
What will the Chancellor announce?
Reeves is expected to announce significant spending cuts after weaker UK economic growth and high government borrowing costs have wiped out the headroom from her Budget in October. She may also lay the groundwork for further tax hikes in the autumn.
Meanwhile, the latest forecasts from the Office for Budget Responsibility (OBR) could make for gloomy reading, with the OBR expected to lower its outlook for UK GDP.
How could this impact the pound?
Sterling could come under pressure in the wake of the Spring Statement, particularly if it paints a bleak picture of the UK economy in 2025. Spending cuts, the prospect of rising taxes, and a downgraded growth forecast could all hammer the pound.
GBP’s losses may be somewhat offset by the UK’s inflation figures on Wednesday morning, if stubborn price pressures help to dampen Bank of England (BoE) interest rate cut expectations.
Never miss a movement. Create a free account with TorFX to get the latest currency news delivered straight to your inbox. You can also set up rate alerts and check live rates 24/7.