Sterling on Edge: Anticipation Rises Ahead of UK Budget Announcement

The British pound remains steady as traders anticipate UK finance minister Rachel Reeves' budget presentation. The sterling options surge reflects market nervousness, with implied volatility reaching new highs. The budget seeks to implement £40 billion in fiscal measures through tax increases and public service cuts.

The pound held its ground on Tuesday, with sterling options hitting their highest levels since early October, indicating modest market anxiety ahead of UK finance minister Rachel Reeves' budget announcement.

Options volatility, signaling demand for short-term price protection, peaked at 8.63% for sterling and 5.33% for euro/sterling, as the pound hovered at $1.297, poised for its first monthly dip since September 2023.

Amid the mixed sentiment, economic growth and a dip in inflation have led the Bank of England to implement a single rate cut, with analysts predicting more cautious monetary easing compared to other major banks.

(With inputs from agencies.)