HSBC expects sterling to move broadly sideways against the U.S. dollar in the coming weeks as currency markets weigh the Oct. 28 U.K. Budget and the Bank of England’s rate outlook.
The bank’s FX Viewpoint webpage, dated Oct. 26, said sterling’s performance over the prior month was surpassed only by the Norwegian krone and dollar among Group of 10 currencies. HSBC said U.K.-specific vulnerabilities were unlikely to weigh on the pound immediately. Its underlying report is dated Oct. 23 and uses market data through the Oct. 22 close.
HSBC said a rate increase was already reflected in market prices, leaving less room for that expectation to lift sterling. It also identified a risk that policymakers could challenge bets on a series of further increases. The bank cited the Budget and the Bank of England’s response to rate expectations as factors in its short-term currency assessment.
Parliament has scheduled the 2026 Budget in the House of Commons for Wednesday, Oct. 28, after Prime Minister’s Questions. In July, Chancellor of the Exchequer John Healey said: “It will be built on fiscal discipline. It will meet our fiscal rules.”
The Bank of England’s Monetary Policy Committee held Bank Rate at 3.75% in September by a 6-3 vote. Three members favored a quarter-point increase to 4%. The Bank of England’s next rate decision is due Nov. 5.
HSBC’s Oct. 5 FX Viewpoint had expected the dollar to strengthen gradually against the pound, while the newer report projected sideways trading. The earlier note said markets were pricing about 21 basis points of November tightening and used data through the Sept. 29 close. The latest report uses data through Oct. 22. HSBC did not explain the change in its outlook.
