The British Pound (GBP) has seen gains against the US Dollar, but these could be threatened by upcoming budget risks. Nordea strategists note that EUR/GBP has traded between 0.84 and 0.87 since late February, with recent GBP strength driven by external factors. The Pound's carry appeal has diminished as the Bank of England (BoE) maintains its policy rate at 3.75%. However, resilient UK growth, averaging +0.6% quarter-on-quarter this year, has supported the currency.
The Autumn Budget Bill, set for October 28th, is seen as a major risk for the GBP. Premier Minister Burnham and Finance Minister Healey face their biggest challenge yet. Markets may react negatively to fiscal measures aimed at reducing the budget deficit, potentially pushing yields higher and weakening the Pound. A November rate hike by the BoE could support the GBP, but fiscal missteps could offset these gains.