Sterling traded around $1.3380 in early European trade on Friday, holding gains
as markets digest the UK autumn budget and await the Bank of England's policy
decision. Brown Brothers Harriman said the UK October 2026 budget is neutral for
the pound and gilts, noting the government has marginally tightened fiscal
policy while planning a modest increase in debt issuance. BBH expects the
interest-excluded, cyclically adjusted primary balance to improve from a 0.3% of
GDP deficit in 2026/27 to a 0.5% of GDP surplus in 2027/28, implying fiscal
tightening equal to a 0.8% GDP drag versus 0.6% projected in March. BBH warned
that the additional tightening may be too mild to materially curb market
expectations of roughly 125bps of Bank of England tightening over the next 12
months.
