Sterling has risen almost 2.6% against the euro and about 1% against the dollar over the past month ahead of Britain's budget. Stronger growth and tighter fiscal policy have supported the currency, while investors are watching whether the budget preserves market confidence.
Sterling is approaching 18-month highs against the euro and has reached its strongest level against the dollar in more than four weeks. Over the past month, it has gained almost 2.6% against the euro and about 1% against the dollar.
Markets have added a quarter-point rate hike to their one-year Bank of England outlook over the past month, while reducing their European Central Bank outlook by a quarter point. Britain's 10-year gilt yield premium over Germany has widened by about 25 basis points to nearly 2 percentage points, while its premium over French debt has halved to 37 basis points. The UK debt-to-GDP ratio is lower than a year ago, supported by faster growth.
Finance minister John Healey is preparing a budget with limited tax and spending changes, according to economists cited in the article. Britain's debt has topped £3 trillion, but its budget deficit for the first six months was more than £4 billion lower than a year earlier. A possible snap election next year could introduce policy uncertainty, ING economist James Smith said.
