The pound sterling exchange market continues its upward momentum, with the budget bill sending positive signals

Recently, the performance of the pound has been strong, and market sentiment has noticeably improved. On November 27, the GBP/USD( rose to 1.3261, marking the sixth consecutive trading day of gains and reaching a new high in the past month. Meanwhile, the euro against the pound fell to 0.8745, also hitting a one-month low. Behind this rebound, the new budget bill released by the UK government has become a key catalyst.

**The budget sets a new fiscal framework**

On November 26, UK Chancellor Jeremy Hunt announced details of a new round of budget plans. The bill includes a £26 billion tax increase plan and raises the fiscal buffer to £22 billion—doubling from £10 billion in March. This expanded fiscal buffer provides the government with more room to maneuver in the face of future shocks, significantly improving market expectations of UK fiscal stability.

**Market institutions are generally optimistic about the outlook**

Deutsche Bank analyst Sanjay Raja commented, "The overall performance of this budget surpasses market expectations, with the doubling of the fiscal buffer being particularly crucial. The austerity measures in the budget are conducive to lowering inflation, which further justifies the Bank of England's potential rate cut policies." He also warned that some fiscal measures may be delayed in implementation, potentially raising questions about their execution.

BlackRock analyst Vivek Paul believes that the UK budget has achieved a relatively balanced allocation between spending and revenue, which should help consolidate market confidence and eliminate concerns over potential political risks.

Berenberg Bank senior UK economist Andrew Wishart added, "From aggregate indicators, the overall direction is satisfactory. Notably, the budget deficit over the next two years is expected to further tighten, which undoubtedly provides policy support for the Bank of England's rate cut path."

**The sustainability of the pound's rebound is worth looking forward to**

Nomura Securities' latest view points out that, since the UK budget successfully avoided the market’s concern of a "significant negative shock," the previous short positions on the pound may face pressure to close. The firm suggests that investors consider taking profits on long positions in EUR/GBP after the bill is announced, leaving room for possible subsequent adjustments.

Overall, the shift from risk release to policy support for the pound has been initially established, and market expectations for future trends have accordingly improved.