Currency traders are betting against sterling ahead of Wednesday’s Budget, fearing Rachel Reeves’ tax plans could further weaken UK growth.
Put-option volumes, used to speculate on or hedge against a fall in the pound, have jumped to more than four times those of calls, signalling strong expectations of a fall in the pound.
Analysts told the FT markets are positioned for a “challenging outcome”, with soft growth data and easing inflation already prompting bets on earlier rate cuts.
Sterling is hovering near its weakest level against the dollar since April, and investors warn that any sign of higher borrowing or unclear fiscal plans could trigger a sharper sell-off.
Some traders expect measures that could push inflation lower, paving the way for faster Bank of England cuts but adding pressure on the currency.
While a well-received Budget could spark a brief rally, most strategists believe the risks for the pound remain firmly to the downside.
FTSE100
The UK's flagship share index, the FTSE 100, was up 17-points at 9,627 shortly after opening this morning.
Brent crude oil futures were up 0.03% at $61.10 a barrel.
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