Sterling fell 0.18% to $1.3283 by 6:17 a.m. ET (10:17 GMT), Investing.com reported Wednesday, as traders awaited Britain's Budget and a Federal Reserve decision, two events that could shift fiscal and rate expectations.
Investing.com attributed the decline to a firmer dollar and caution ahead of the Fed decision. Parliament scheduled Chancellor John Healey's Budget statement for 8:30 a.m. ET (12:30 p.m. GMT), with technical documents to follow.
In an Oct. 26 note, Philip Wee, Senior FX Strategist - G3 & Asia, at DBS Group Research, said sterling's support partly reflects expectations for an interest-rate increase. DBS put market pricing for a quarter-point Bank of England (BoE) increase to 4% at its Nov. 5 meeting at 102%. The current Bank Rate is 3.75%.
DBS said weaker growth resulting from the Budget or borrowing estimates that disappoint investors could prompt them to cash in recent sterling gains. It sees 1.34 as a barrier for GBP/USD. EconoTimes previously covered sterling's move against the yen ahead of the Budget and Bank of Japan decision.
The Office for National Statistics (ONS) said public sector net borrowing reached £24.5 billion in September, up £1.8 billion from a year earlier and £1.9 billion above the Office for Budget Responsibility forecast. The government has said the Budget would meet its fiscal rules. In an Oct. 23 note, DBS said the cost of borrowing left the government little room for error and that investors would assess its commitment to those rules. In his Oct. 26 note, Wee warned against repeating the mistakes of the 2022 mini-budget crisis.
The Federal Reserve was scheduled to announce its decision at 2 p.m. ET (18:00 UTC), with a news conference at 2:30 p.m. ET (18:30 UTC). Its target range is 3.75%-4%, after a September increase. DBS expected no immediate rate change from the Fed or European Central Bank (ECB), while leaving possible increases in December on the table. The ECB decision is scheduled for 9:15 a.m. ET (13:15 UTC) Thursday; the BoE's next decision is Nov. 5.
