Key points:

• UK pound reacts to new budget
• Traders move it up but then back off
• What’s changing after budget unveiling?

New budget’s in: here’s what is changing (spoiler: taxes are about to hit all-time high.)

💷 Pound Seesaws as Budget Lands

• The GBPUSD swung between $1.3270 and $1.32 early Friday as traders digested the UK’s new budget. It’s the event that tends to cause volatility because taxes rise, forecasts shift, and the Chancellor uses the word “robust.”
• The sharp intraday swings reflected uncertainty over how higher fiscal pressures might impact growth and future rate expectations. Sterling usually gets jittery when the government rewrites big economic levers.
• The pair seems to be holding near $1.32, but sentiment remains fragile as markets weigh whether tighter budgets strengthen credibility or weigh on the recovery.

📑 Taxes Set to Hit Record Levels

• The budget raises taxes by £26 billion, pushing the tax burden to an all-time high of 38% of GDP by the end of Parliament. Traders don’t need a PhD to know that’s… a lot.
• Dividend, property, and savings taxes all rise by 2 percentage points, making it more expensive to earn income. Investors are already recalibrating return expectations.
• Inflation is now projected at 3.5% for 2025, up from March’s 3.2% estimate. It’s a signal of lingering price pressures and potentially keeping the Bank of England cautious on rate cuts.

📈 Markets React Beyond FX

• The FTSE 100 climbed 0.9% and the FTSE 250 jumped 1.2% as equities welcomed clarity after months of Budget uncertainty. Even heavy tax talk can’t stop a relief rally.
• UK stocks often rebound once policy fog lifts, especially when corporate earnings aren’t directly threatened by the announcements. This week followed the playbook.
• In FX, though, traders remain on edge. With fiscal tightening ahead and inflation still sticky, sterling could face more volatility as markets debate whether this Budget steadies the ship.

Source: Tradingview