GBP/USD risk reversals point to weaker Pound – Commerzbank
GBP/USD faces heightened downside risks as market-implied volatility and risk reversals signal expectations for a weaker Pound Sterling (GBP) ahead of the UK Budget, with a credible fiscal plan from Chancellor Reeves key to restoring investor confidence, Commerzbank’s FX analyst Michael Pfister notes.
“Risk reversals clearly showed that most market participants held a similar view, shifting towards more risks for a weaker pound in recent weeks. We are likely to see a further shift towards higher implied volatility and more negative GBP/USD risk reversals in the coming days. Although this shift has already taken place to some extent, last year we only reached the peak shortly after the budget presentation. However, repeated comparisons with the Truss episode, when Liz Truss shocked the financial markets with ill-conceived plans for revenue and spending, are probably inappropriate.” Read more…
GBP/USD rises as markets await crucial UK budget
The GBP/USD pair extended its gains, reaching 1.3189, as investors await details of the UK budget, to be presented today, 26 November. All attention is on Chancellor Rachel Reeves and her strategy to close the fiscal deficit while adhering to the government’s self-imposed budgetary rules. This challenge requires finding tens of billions of pounds in savings or revenue. Market volatility has been stoked by reports suggesting the government may avoid immediate tax increases.
The fiscal backdrop is deteriorating. According to media reports, the Office for Budget Responsibility (OBR) is preparing to lower its growth forecasts for 2026 and beyond. This revision could widen the budget deficit by £20–30 billion, intensifying the long-term pressure for tax rises. Read more…
