• The Pound Sterling rises against its major peers after the UK budget announcement.
• Traders pare back BoE interest-rate cut bets due to upwardly revised inflation forecasts.
• In the US, investors expect the NFP report to show lower labor demand in October.

The Pound Sterling (GBP) outperforms its majority of peers on Thursday as traders have pared back bets that the Bank of England (BoE) will cut interest rates aggressively after the United Kingdom (UK) Labour government announced its first Autumn Forecast Statement on Wednesday. 

The budget presentation from UK Chancellor of the Exchequer Rachel Reeves was filled with the biggest tax increase in almost three decades to repair the hole in public services, which she referred to as “inheritance from Conservatives”.

The major highlight of the UK budget was the collection of taxes worth 40 billion pounds through an increase in employers’ contribution to National Insurance (NI), higher duty on alcohol and tobacco, and a sharp increase in Capital Gains Tax. Reeves allocated higher spending to various areas such as the National Health Service (NHS), affordable housing, funding duty freeze on fuel, and setting up green hydrogen projects.

Meanwhile, the UK’s Office for Business Responsibility (OCR) has upwardly revised inflation forecasts for 2024 to 2.5% from 2.2% projected in March, a revision that also led traders to expect less interest rate cuts by the BoE. The agency also revised inflation forecasts for 2025 significantly higher, to 2.6% from 1.5% previously anticipated.