Market sentiment remains cautious, influenced by U.S. speech tones and the Bank of England’s observations, especially with the upcoming fiscal budget plans that include tax increases and spending cuts, potentially impacting consumer and business activity.

In the currency markets, the pound fell 0.13% to USD 1.34225 and 0.5% to 1.0594 Swiss francs, reaching its weakest level since late 2022 against the franc.

Meanwhile, the US dollar has weakened broadly amid expectations of a Federal Reserve rate cut of about one percentage point within the next six months and investor preference for safer assets amid economic uncertainty.

Looking ahead, the UK government’s upcoming November budget is expected to include tax hikes and spending cuts, which could dampen consumer spending and business activity, adding to investor concerns about fiscal stability.

Despite limited UK economic data due to a government shutdown, signs of a slowing labor market and subdued economic activity have been observed, although the economy narrowly returned to growth in August.

On Friday, the pound declined against both the US dollar and Swiss franc as investors moved toward safe-haven currencies like the Swiss franc and Japanese yen due to concerns over the US economy, regional banks, and global trade tensions, although it still posted a weekly gain of 0.7%.

The IMF projects the UK will have the second-fastest economic growth among G7 nations in 2025 after the US, prompting the Bank of England to remain cautious with rate cuts, which are not expected until early next year.

The Bank of England remains cautious, not expected to cut interest rates until at least February or March, as it balances persistent inflation with sluggish economic growth, supporting the pound which has gained nearly 7.5% against the dollar this year.