Budget day - how will this affect the pound?

Blog By David Stritch, Senior Multicurrency Analyst, Caxton | October 28th 

Will the UK Budget move the pound today?

Probably not by much, unless it surprises. Chancellor John Healey delivers his first Budget today, Wednesday 28 October. Traders expect a non-event. Sterling was trading around 1.33 against the US dollar (GBP/USD) this morning. Recent softness has come mainly from shifting interest rate expectations, not Budget nerves. When the market expects nothing, though, even a small policy nudge can move the pound.

Key takeaways

• Today’s Budget is the first from Chancellor John Healey and the Burnham government, and the build-up has been deliberately low-key.
• Early signals, such as easing tariffs on everyday goods like gherkins and marmalade, suggest incremental policy rather than sweeping change.
• Sterling has eased back from its mid-October highs, mainly because of changing expectations for Bank of England interest rates.
• Because traders are positioned for a quiet day, any genuine surprise on tax, spending or borrowing could cause an outsized move.

What is happening today?

Today the Chancellor sets out the government’s tax and spending plans to Parliament. John Healey was appointed Chancellor on 20 July 2026 and presents his first Budget today, alongside an updated economic and fiscal forecast from the Office for Budget Responsibility. 

The day has arrived with surprisingly little fanfare. Critics have already accused the Prime Minister and Chancellor of ducking the big decisions before a single measure has been announced. That is largely a product of their own approach. Both seemed keen to keep this a low-key event, likely because time was short after Andy Burnham’s arrival in Downing Street.

The few confirmed details point the same way. Yesterday it was confirmed that tariffs on gherkins and marmalade will be eased. That is hardly the stuff of fiscal revolution. On that evidence, the odds are against breakneck policy changes this afternoon.

Why does the Budget matter for the pound?

The Budget affects the pound through government borrowing and interest rates. A larger borrowing requirement can push up gilt yields, which are the interest rates on UK government debt. That can unsettle investors if they doubt the government’s fiscal credibility.

The Budget also shapes the Bank of England’s task. Looser fiscal policy can add to inflation pressure and keep rates higher for longer. Tighter policy can do the opposite. Currency markets price these knock-on effects quickly.

Today, however, the pound is being driven more by the Bank of England than by the Treasury. Sterling’s recent slide owes more to shifting rate expectations than to Budget speculation. Governor Andrew Bailey has pushed back against market expectations of a series of rate hikes in comments to the Treasury Select Committee. has sterling been performing?

Sterling has lost some ground over the past week but remains higher than it was a month ago. Bloomberg’s British Pound Index, which tracks sterling against a basket of major currencies, stood at 671.67 at 09:16 this morning. That is down from a peak near 674 in mid-October, but well above its late-September low of around 663.

Against the dollar, GBP/USD opened at 1.3306 this morning. It is down 0.75% over five days, roughly flat over three months, and 1.34% lower year to date. The pound opened at 1.1961 against the euro (GBP/EUR).

What is the market watching next?

The first test comes when the Chancellor sits down and the OBR’s forecasts land. Markets will look at three things:

• the headline borrowing numbers
• whether the government stays within its fiscal rules
• any measures large enough to change the inflation outlook

After today, attention returns to the Bank of England and its next rate decision. Politics matters too. The reception this Budget gets could influence whether the Prime Minister considers an early election. That is a longer-running source of sterling uncertainty.

What does this mean for businesses and individuals with currency exposure?

Budget days rarely cause lasting moves on their own. They can, however, create sharp intraday swings, especially when the market is complacent.

If you pay overseas suppliers, receive foreign revenue or plan to move a large sum soon, today is a reasonable moment to check your exposure. A forward contract fixes an exchange rate today for a payment later and can remove the guesswork around event risk. Rate alerts can tell you when a target level is reached without you watching the screen.

Individuals holding wealth across currencies should remember that the bigger driver over the coming months is likely to be interest rate policy, not today’s statement.

David’s view

My read is that traders have positioned for a non-event, and the government’s own signals justify that. The risk lies in the gap between expectation and reality. With so little priced in, anything resembling a meaningful shift on tax, spending or borrowing could produce a bigger reaction than it would on a normal Budget day. My central case is a quiet session, but not a guaranteed one.

FAQ

Will the UK Budget affect the pound?
It can, mainly through its implications for government borrowing, gilt yields and Bank of England policy. Today, markets expect limited changes, so a large move would likely need a genuine surprise.

What time is the Budget announced?
The Chancellor usually speaks in the House of Commons after Prime Minister’s Questions, which begin at midday. The OBR’s forecasts are published at the same time as the statement.

Why has the pound fallen recently?
Sterling has eased from its mid-October high mainly because of shifting expectations for Bank of England interest rates rather than Budget speculation.

Should I make an international payment before or after the Budget?
Timing a transfer around a single event is difficult, and rates can move either way. Many businesses use forward contracts or rate alerts to manage that uncertainty rather than trying to predict the outcome.

Manage your currency risk on Budget day

If today’s Budget could affect payments you need to make or receive, Caxton’s multicurrency dealers can talk you through options such as forward contracts and rate alerts. Join our pre-Budget briefing here: [BRIEFING LINK], or get in touch with our International Payments team.

This article is for information only and does not constitute financial advice. Exchange rates can move quickly and past performance is not a guide to future performance.