Sterling held steady against the dollar in early European trading on Monday, up just 0.07% to $1.297. The pound hovered around its lowest point since August, as investors geared up for the autumn budget.
Chancellor Rachel Reeves is set to deliver Labour’s first budget in nearly 15 years on Wednesday 30 October.
In a speech ahead of the budget on Monday, prime minister Keir Starmer is expected to warn that it is time to “embrace the harsh light of fiscal reality”.
Both Starmer and Reeves have said that this budget will involve some “tough” decisions, claiming that they have inherited a £22bn “black hole” in public finances from the previous Conservative government.
In Wednesday’s budget, Reeves is expected to announce tax rises to raise funds. However, Reeves also confirmed last week that the government would change the way debt is measured to fund more investment.
Read more: FTSE 100 LIVE: London slips as confidence drops ahead of budget but Europe pushes higher
Neil Wilson, chief market analyst at Finalto, said: “One thing is sure – it’s going to be painful. I’m not convinced that the market will give the government a thumbs up for being overly statist.
“Hiding behind a technical tweak to debt rules is risky – they will need to make the case for why that money is going to increase growth/productivity.”
Against the euro (GBPEUR=X), the pound was down 0.1%, trading at €1.1988.
Gold prices dipped on Monday morning as the dollar remained strong, as investors looked ahead to economic data releases this week and the US Federal Reserve’s next interest rate decision.
Spot gold was down 0.5% to $2,733.67 per ounce, while gold futures were 0.3% in the red at $2,7545.80.
Investor appetite for gold as a safe haven asset appeared to have shifted, despite uncertainty with the US presidential election next week and continued conflict in the Middle East.
In terms of US economic data releases, the advance estimate of third-quarter gross domestic product figure is due out on Wednesday.
Read more: UK business confidence dips to lowest level since June ahead of budget
The September personal consumption expenditure (PCE) index – the Fed’s preferred measure of inflation – is due out on Thursday.
The US October payrolls report is then slated for release on Friday.
These data points are key in guiding central bank monetary policy, with the Fed set to announce its latest interest rate decision on 7 November, just two days after the presidential election.
Crude oil prices slid on Monday morning after Israel refrained from targeting Iran’s refining facilities in an attack over the weekend.