The British pound firmed on Wednesday, advancing against both the US dollar and the euro after Chancellor Rachel Reeves unveiled the Autumn Budget, which had been largely revealed ahead of schedule due to an early leak of core fiscal details.
Hours before the finance minister formally delivered the statement to Parliament, financial markets had already digested the leaked numbers, prompting immediate movement in major currency pairs. Traders reacted swiftly, selling off the dollar and euro while bidding up the pound in anticipation of the full fiscal plan.
Reeves, during her address, outlined strategies aimed at tackling a £20 billion gap in the nation’s public finances. Although the speech sought to set out the government’s priorities, the spotlight had already shifted to the unexpected advance release of key figures. The presentation confirmed a projected £26 billion increase in net taxes by the decade’s end—placing the overall tax burden at an unprecedented 38 percent of GDP.
Sterling climbed to as high as $1.31929 before later stabilising around $1.314 as investors recalibrated expectations in light of the leaked Office for Budget Responsibility (OBR) report. The agency’s findings revealed a larger-than-anticipated £22 billion fiscal buffer, surpassing the earlier £15 billion estimate, alongside forecasts of slower economic expansion and elevated inflation levels for 2026. The premature publication of the OBR analysis triggered heightened volatility, as such information is typically released only after the budget announcement.
Among the fiscal adjustments detailed by the OBR were increased gambling duties, a levy on properties valued above £2 million, and a two-percentage-point increase in dividend taxation—measures expected to generate £26.1 billion by the 2029–2030 fiscal year. Income tax and national insurance thresholds are also set to remain frozen through 2030–2031.
Sterling rose roughly 0.3 percent against the euro, shifting EUR/GBP from 0.88 to 0.876, while GBP/USD recorded a similar 0.3 percent gain to settle around 1.32. The pound hovered near a three-week high against the euro during Tuesday’s session and has maintained a consolidation pattern in the build-up to the budget statement.
The budget also introduced targeted welfare improvements and selective tax interventions. While income tax rates remain unchanged, the extended freeze on tax thresholds is projected to pull an additional 1.5 million taxpayers into higher tax brackets. The annual cash ISA cap will be set at £12,000 for individuals under 65, including an £8,000 allocation specifically reserved for stocks and shares investments.
“This approach is designed to channel savings into domestic growth,” Reeves noted. Additionally, the two-child benefit limit is slated for removal in April 2026, a move estimated to cost £3 billion annually.
The state pension will rise by 4.8 percent, matching earnings growth, while universal credit and disability benefits will increase by 3.6 percent. A new “mansion tax” premium will take effect in 2028, imposing an extra £2,500 charge on properties over £2 million and £7,500 on those exceeding £5 million.
Despite initial concerns that the budget could unsettle gilt markets, investor sentiment remained steady—helped in part by the early leak that had already priced in many of the fiscal measures. Borrowing for 2025–2026 is forecast at £83.1 billion, with the plan narrowly aligning with the chancellor’s fiscal rulebook and allowing limited leeway under the national debt target.
