Key Moments
- GBP rises 0.18% against JPY to trade near 210.30, despite lagging most other major currencies.
- Deutsche Bank now expects roughly GBP 20bn in additional UK investment over five years via PuFins, implying a near GBP 10bn annual increase later in the OBR forecast horizon.
- Markets anticipate the BoJ will keep its policy rate at 1.25% in its upcoming meeting, as investors price in one to two hikes over the next 12 months.
GBP Gains Versus JPY Amid Broader Underperformance
The British Pound (GBP) trails most major currencies on Tuesday, with the notable exception of the Japanese Yen (JPY). Against the Yen, Pound Sterling advances 0.18%, trading close to 210.30.
GBP Performance Against Major Currencies
The following table summarizes the British Pound’s percentage moves versus key counterparts today. According to the data, GBP shows its weakest performance against the New Zealand Dollar.
| Base Currency | Quote Currency | Move Today | Comment |
|---|---|---|---|
| GBP | JPY | +0.18% | Pound trades near 210.30 against the Yen |
| GBP | NZD | Weakest vs majors | British Pound shows its largest underperformance against NZD |
The performance overview is based on a heat map that shows percentage changes among major currencies. In this matrix, the base currency is taken from the left-hand column and the quote currency from the top row. For instance, choosing the British Pound as the base in the left column and moving horizontally to the US Dollar cell provides the percentage change for GBP (base)/USD (quote).
Despite the modest rise against the Yen, the Pound remains under pressure as investors position ahead of the United Kingdom (UK) Autumn Forecast Statement scheduled for Wednesday.
UK Budget: Larger Investment via Public Financial Institutions
Economists at Deutsche Bank observe that their initial expectation was for the Chancellor to utilize available fiscal rule flexibility through financial transactions executed by public financial institutions, known as PuFins. Under this baseline scenario, they anticipated a two-step enhancement of investment spending: a GBP 8bn increase in the forthcoming Autumn Budget, followed by another GBP 8bn rise in the Spending Review planned for next year.
However, Deutsche Bank flags that recent reporting has shifted those assumptions. They note that “headlines from the FT over the weekend… suggest that Chancellor Healey will do more in the Autumn Budget, adding around GBP 20bn in investment over the next five years.”
Building on these indications, Deutsche Bank further states that, “taking into account the slightly higher savings from HMRC, we project a near GBP 10bn increase per annum over the back half of the OBR’s forecast horizon, leaving the government’s gross financing requirement at just over GBP 250bn at the end of the forecast horizon (2030/31).” Using the Office for Budget Responsibility’s own modeling framework, they add that “using the OBR’s multipliers, we estimate that projected financial transactions could result in a 0.5% boost to GDP by 2031/32.”
With prospective investment now seen as larger than previously built into forecasts, Deutsche Bank contends that “with investment spending now primed to be bigger than expected, one large tail risk for Budget Day has been removed with markets likely to adjust to the news ahead of the 28th of October.”
Bank of England Outlook: Markets See 25 bps Hike
On the monetary policy side, pricing in financial markets indicates strong confidence that the Bank of England (BoE) will lift its policy rate by 25 basis points to 4% at its November meeting.
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