Prime Minister Keir Starmer defended Chancellor Rachel Reeves and the Office for Budget Responsibility after a premature report release, stressing fiscal stability despite political criticism, Commerzbank's FX analyst Antje Praefcke notes.

GBP faces lingering pressure from budget concerns

"At a press conference yesterday, UK's Prime Minister Keir Starmer defended his Chancellor of the Exchequer Rachel Reeves' controversial budget and rejected accusations by the opposition that she had misled voters and her cabinet colleagues about the financial situation. Starmer also stands behind the Office for Budget Responsibility (OBR), which inadvertently published its report before Reeves' speech to Parliament, despite the 'serious error', describing the OBR as extremely important for stability."

"Nevertheless, the pound is not out of the woods yet. Expenditures are likely to rise significantly in the next two years, which is why savings are planned for after that. However, given that Nigel Farage's party has been ahead of the Labour government in the polls for months, it is questionable whether savings or tax increases will really be pursued in the run-up to the parliamentary elections in the summer of 2029. But perhaps this unpleasant task will be left to the next government."

"For the foreign exchange market, it is important to note that the budget issue in the UK will be a long-running problem and that unpleasant news on this topic may continue to emerge. In the absence of clear solutions, the issue is likely to remain a subliminal burden on the pound."