28.10.202513:56:01UTC+00Sterling Falls to 3-Month Low

The British pound declined to approximately $1.325, marking its weakest point since the end of July. This downturn occurred as traders slightly increased their expectations for rate cuts from the Bank of England. This shift in sentiment was influenced by reports suggesting that the Office for Budget Responsibility intends to lower the UK's productivity growth forecast by about 0.3 percentage points. Such a revision could create a £20 billion shortfall in public finances. The downgrade places additional pressure on Chancellor Rachel Reeves as she prepares for next month's budget, where she is anticipated to present strategies to manage a fiscal deficit potentially reaching £35 billion. Additionally, more moderate inflation data have bolstered the likelihood of monetary easing, highlighted by the latest report from the British Retail Consortium, which indicated further reductions in food price inflation. This follows on from last week's consumer price index figures, which were cooler than anticipated. The easing of price pressures has alleviated some worries about ongoing inflation. Consequently, money markets are now estimating about a 68% chance of a 25 basis-point rate cut by the Bank of England in December.