Anxiety took hold of UK markets earlier today, as investors battled with souring growth prospects but also murky revival efforts from the government due to concerns over the country’s fiscal outlook.

Driving 30-year gilts higher were concerns of the markets in regards to Chancelor Reeve’s Autumn Budget which entail further tax raises to keep targets in rails and contain the deficit, but would most likely put additional strain on the UK economy, particularly its growth expansion.

The 2024 Autumn Budget involved tax increases primarily targeting wealthy individuals, changes to capital gains tax, inheritance tax reforms, and other measures to raise government revenue by around £40 billion.

As for the 2025 version, speculations point to possible changes to pensions, inheritance tax and capital gains taxes amongst others, which unnerved investors. Gilts tend to react negatively to inbound increased borrowing to fund future spending, as investors demand higher returns (higher risk-reward premium) for lending out their money when they expect higher debt levels.

BoE’s Governor Bailey underscored the UK’s problem with outright maintaining its current growth trajectory which appears shaky at best, noting that the current budget practices will further complicate matters and impede the kingdom from boosting economic growth in the quarters to come. Alas, MPC’s members jobs are now expected to become harder as they battle to balance policy actions to best fit the evolving situation.

Given the developments, the Pound got the short end of the stick and fell against the greenback in today’s session, dropping by over 1% and the FTSE 100 pulled further away from its recently touched all-time highs.

A factor that could sort of contain worries and aid the expansion of the UK’s growth function may be the rising credit card applications and mortgage approvals, which showcase healthy circulation flows in the economy and as a result increased consumption and spending by UK citizens in the past three months.

Technical Analysis

GBPUSD Chart – The Pound slips by over 1% after UK’s Gilts spike to 27-year highs on fiscal worries

Resistance: 1.3600 (R1), 1.3800 (R2), 1.4000 (R3)
Support: 1.3400 (S1), 1.3160 (S2), 1.3000 (S3)