{"id":25915,"date":"2025-07-07T09:10:05","date_gmt":"2025-07-07T09:10:05","guid":{"rendered":"https:\/\/www.vtmarkets.com\/?p=25915"},"modified":"2025-07-07T09:10:05","modified_gmt":"2025-07-07T09:10:05","slug":"pound-weakens-as-fiscal-anxiety-grows","status":"publish","type":"post","link":"https:\/\/www.vtmarkets.com\/en-ca\/analysis\/pound-weakens-as-fiscal-anxiety-grows\/","title":{"rendered":"Pound Weakens as Fiscal Anxiety Grows"},"content":{"rendered":"\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"559\" src=\"https:\/\/www.vtmarkets.com\/en-ca\/wp-content\/uploads\/sites\/13\/2026\/03\/gbp7-1024x559.png\" alt=\"\" class=\"wp-image-17037\" \/><\/figure>\n\n\n\n<p><strong>Key Points:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>GBP\/USD falls to 1.3607 after peaking at 1.3681 earlier in the week<\/li>\n\n\n\n<li>Traders expect a 25bps BoE rate cut in September, but fiscal concerns dominate sentiment<\/li>\n<\/ul>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity is-style-dots\" \/>\n\n\n\n<p>The British pound declined sharply on Monday, falling to <strong>$1.3607<\/strong>, its lowest level in two weeks. The pair had previously touched <strong>1.3681<\/strong> before turning lower, dragged down by market concerns over the UK\u2019s budget outlook and political shifts within the Labour government.<\/p>\n\n\n\n<figure class=\"wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter\"><div class=\"wp-block-embed__wrapper\">\n<blockquote class=\"twitter-tweet\" data-width=\"500\" data-dnt=\"true\"><p lang=\"en\" dir=\"ltr\">UK&#39;s Reeves announces National Wealth Fund investment in carbon capture <a href=\"https:\/\/t.co\/KPWoDvbyNk\">https:\/\/t.co\/KPWoDvbyNk<\/a> <a href=\"https:\/\/t.co\/KPWoDvbyNk\">https:\/\/t.co\/KPWoDvbyNk<\/a><\/p>&mdash; Reuters (@Reuters) <a href=\"https:\/\/twitter.com\/Reuters\/status\/1942076155563024571?ref_src=twsrc%5Etfw\">July 7, 2025<\/a><\/blockquote><script async src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script>\n<\/div><\/figure>\n\n\n\n<p>Chancellor <strong>Rachel Reeves<\/strong> warned in an interview with <em>The Guardian<\/em> that tax hikes may be on the table in the autumn budget. While she avoided committing to a rate, the suggestion alone added pressure to the pound, as investors fear the economic drag of rising tax burdens.<\/p>\n\n\n\n<h2 class=\"wp-block-heading has-medium-font-size\">Labour\u2019s Policy Retreat Sparks Uncertainty<\/h2>\n\n\n\n<p>In addition to budget tensions, Labour\u2019s recent reversal on welfare reform has further unnerved markets. Reeves admitted there were &#8220;costs&#8221; to the concessions made to avoid internal dissent. These developments have prompted speculation about <a href=\"https:\/\/t.co\/7YgR2Uqpin\" target=\"_blank\" rel=\"noopener\" title=\"\">future fiscal tightening<\/a>\u2014either through cuts or increased taxation\u2014further cooling investor confidence in UK assets.<\/p>\n\n\n\n<p>The pound\u2019s decline reflects waning appetite for sterling-denominated instruments in the face of policy instability.<\/p>\n\n\n\n<h2 class=\"wp-block-heading has-medium-font-size\">Monetary Policy Outlook Remains Dovish<\/h2>\n\n\n\n<p>Despite fiscal concerns, rate expectations have remained stable. Markets are still pricing in a <strong><a href=\"https:\/\/t.co\/Jkwz0yQ7MG\" target=\"_blank\" rel=\"noopener\" title=\"\">25-basis-point cut from the Bank of England<\/a><\/strong> in <strong>September<\/strong>, as inflation data softens and the broader UK economy struggles for momentum.<\/p>\n\n\n\n<p>However, the falling pound could complicate matters. Further depreciation might import inflation through higher import costs, challenging the BoE\u2019s path toward easing.<\/p>\n\n\n\n<h2 class=\"wp-block-heading has-medium-font-size\">US Tariffs Add External Pressure<\/h2>\n\n\n\n<p>Compounding the domestic issues are escalating global trade tensions. President Donald Trump confirmed that reciprocal tariffs will be reintroduced from August 1, reverting to levels seen on April 2 for countries without formal trade agreements.<\/p>\n\n\n\n<p>Treasury Secretary Scott Bessent added that partners <a href=\"https:\/\/t.co\/VLWhcwC5Md\" target=\"_blank\" rel=\"noopener\" title=\"\">yet to finalise a deal<\/a> will face higher baseline rates. Trump also hinted at a 10% punitive tariff on nations that support \u201canti-American policies of BRICS,\u201d further fuelling risk-off sentiment in global currency markets.<\/p>\n\n\n\n<p>The US dollar, already buoyed by strong jobs data and fading Fed rate-cut bets, continued to firm, dragging cable lower.<\/p>\n\n\n\n<h2 class=\"wp-block-heading has-medium-font-size\">Technical Analysis<\/h2>\n\n\n\n<p>Cable extended its downside correction, slipping to an intraday low of 1.36028 as bearish pressure accelerated from the recent swing high of 1.36815. The pair remains firmly below its 5, 10, and 30-period moving averages, all sloping downward and reinforcing a short-term bearish trend.<\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><img decoding=\"async\" src=\"https:\/\/www.vtmarkets.com\/en-ca\/wp-content\/uploads\/sites\/13\/2026\/03\/image-4.jpg\" alt=\"\" class=\"wp-image-25916\" \/><\/figure>\n\n\n\n<p class=\"has-text-align-center\"><em>Picture: GBPUSD dips below 1.3610 as downside momentum builds. Support eyed at 1.3580, as seen on the <a href=\"https:\/\/vtmarketsapp.onelink.me\/CD7D\/240525WA\" target=\"_blank\" rel=\"noopener\" title=\"\">VT Markets app<\/a><\/em><\/p>\n\n\n\n<p>The MACD continues to deepen below the signal line, with a widening histogram in negative territory\u2014pointing to ongoing downward momentum. Unless 1.3620 is reclaimed soon, further losses toward 1.3580 could be on the cards. Traders may also be watching for a potential reversal if MACD shows early signs of divergence.<\/p>\n\n\n\n<h2 class=\"wp-block-heading has-medium-font-size\">Policy Signals Take the Driver\u2019s Seat<\/h2>\n\n\n\n<p>With the <strong>autumn budget<\/strong> now in focus and the BoE looking dovish, GBP\/USD could continue to trade under pressure in the short term.<\/p>\n\n\n\n<p>Unless there\u2019s clarity on tax policy or positive labour market surprises, the pound may struggle to reclaim the <strong>1.3680<\/strong> level. Traders should also watch for any adjustments in US tariff policy heading into <strong>August 1<\/strong>, as that could further strengthen the dollar and weigh on cable.<\/p>\n\n\n\n<p><strong><a href=\"https:\/\/www.vtmarkets.com\/trade-now\/\" target=\"_blank\" rel=\"noopener\" title=\"\">Create your live VT Markets account<\/a> and <a href=\"https:\/\/myaccount.vtmarkets.com\/login?_gl=1*5vyjdn*_gcl_au*Njc1MzM0NjY0LjE3NTEzNTM4MTc.*_ga*MjA5ODA0NDIzNC4xNzI3OTE1ODQ1*_ga_J26NL1ZVX7*czE3NTE4NzkxMDYkbzMwOCRnMSR0MTc1MTg3OTExOCRqNDgkbDAkaDA.*_ga_6XQ8153GYW*czE3NTE4NzkxMDgkbzU3JGcxJHQxNzUxODc5MTE4JGo1MCRsMCRoMA..*_ga_BG6LYEHPX1*czE3NTE4NzkxMDgkbzUkZzEkdDE3NTE4NzkxMTgkajUwJGwwJGgw*_ga_J8BRGZSREX*czE3NTE4NzkxMDgkbzUkZzEkdDE3NTE4NzkxMjIkajQ2JGwwJGgw*_ga_7CG6454YR5*czE3NTE4NzkxMDgkbzUkZzEkdDE3NTE4NzkxMjIkajQ2JGwwJGgw*_ga_69Z54R4H9N*czE3NTE4NzkxMDgkbzUkZzEkdDE3NTE4NzkxMjIkajQ2JGwwJGgw*_ga_CY2VCKFC3C*czE3NTE4NzkxMDgkbzUkZzEkdDE3NTE4NzkxMjIkajQ2JGwwJGgw*_ga_TXZ07R2C21*czE3NTE4NzkxMDgkbzUkZzEkdDE3NTE4NzkxMjUkajQzJGwwJGgw*_ga_17TMGY9BBE*czE3NTE4NzkxMDgkbzUkZzEkdDE3NTE4NzkxMjUkajQzJGwwJGgw*_ga_MWDVVSEVL5*czE3NTE4NzkxMDgkbzUkZzEkdDE3NTE4NzkxMjUkajQzJGwwJGgw*_ga_2QCC3S2748*czE3NTE4NzkxMDgkbzUkZzEkdDE3NTE4NzkxMjUkajQzJGwwJGgw*_ga_E7D2PCX624*czE3NTE4NzkxMjYkbzUkZzAkdDE3NTE4NzkxMjYkajYwJGwwJGgw*_ga_XJ4037XKK6*czE3NTE4NzkxMjYkbzUkZzAkdDE3NTE4NzkxMjYkajYwJGwwJGgw*_ga_EJCVQDC7VT*czE3NTE4NzkxMDgkbzUkZzEkdDE3NTE4NzkxMjYkajQyJGwwJGgw\" target=\"_blank\" rel=\"noopener\" title=\"\">start trading<\/a> now.<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The British pound sinks to 1.3607 amid rising UK fiscal anxiety, Labour policy shifts, and Trump\u2019s tariff escalation plan. Traders eye a September BoE rate cut. &#8211; vtmarkets.com<\/p>\n","protected":false},"author":64,"featured_media":17037,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[31],"tags":[10,77],"class_list":["post-25915","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-analysis","tag-forex","tag-gbp"],"acf":{"acf_article_selection_author":""},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/25915","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/users\/64"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/comments?post=25915"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/25915\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media\/17037"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=25915"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=25915"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=25915"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}