Two days ahead of the Bank of England’s rate decision, the UK’s Chancelor of Exchequer, Rachel Reeves, held an uncanny, surprise public announcement to inform British citizens about the Labour party’s fiscal plans, addressing the massive budget hole that she and her colleagues have to fill.

Even though the Chancelor did not lay down concrete plans as to what will happen, she hinted through her speech that austere tax reforms will most likely follow. The move is seen as a preparation attempt, possibly fishing for market reactions or possibly looking to ease the blow or outright avoid a backlash by appearing forthcoming and trusting. The Autumn budget is scheduled to be announced in 3 weeks’ time, on November 26th.

The Chancellor reiterated the need to exit the tough spot, former administrations put the UK economy in “after years of mismanagement”, pledging to restore order with an “iron clad” fiscal playbook and begging the citizens to trust her “tough but fair decisions”.

Strategists note that the Chancelor cannot put through a policy that will be inflationary in nature. Indeed, Reeves outright spelled out that through this budget the aim is to reduce inflation further and reinvigorate growth within the economy, which would allow the Bank of England to lower rates even further. Stronger than expected wage growth is giving the Labour party some breathing room, but more needs to be done, to ensure enough wiggle room and headspace for UK’s public finances in the years to come.

Tax hikes appear to be the go-to measure to reduce a towering £2.7 trillion pound debt of whose interest payments sap away funds on a daily basis, and these very tax hikes she hinted at must cover day-to-day spending by the end of the decade.

The UK government has been targeting non-domiciled wealthy individuals and ponders whether to hike dividend and mansion taxes. Mass exodus of CEOs from the UK maybe in the making. Nik Storonsky, Revolut CEO has already departed the UK and established residency in UAE, a much more tax-favouring destination for the ultrawealthy.

Technical Analysis

GBPUSD Chart: The Pound slips to 7 month lows after UK Chancelor Reeve’s unscheduled pre-Autumn budget appearance

Resistance: 1.3160 (R1), 1.3300 (R2), 1.3450 (R3)
Support: 1.3000 (S1), 1.2860 (S2), 1.2720 (S3)