Pound Dips Amid Political Uncertainty Over UK Tax Plans

The British pound weakened against major currencies following reports that the UK will not increase income tax rates in its upcoming budget. Prime Minister Keir Starmer's decision raises questions of political stability and fiscal resolve, impacting the currency’s strength as the budget announcement nears.

The British pound suffered losses against the dollar and euro on Friday as reports emerged that upcoming UK budget changes would not include anticipated income tax increases. Sterling fell 0.3% against the dollar, settling at $1.3151, while dipping more significantly against the euro, reaching its lowest point since April 2023 at 88.64 pence.

According to sources cited by the Financial Times, British Prime Minister Keir Starmer and finance minister Rachel Reeves have scrapped plans for raising income tax rates, marking a significant policy shift ahead of the crucial budget speech set for November 26. The decision arrives amidst mounting pressure on Starmer's leadership within his party.

"Political uncertainty leading to a pivot in fiscal approaches spells trouble for the pound," remarked Moh Siong Sim, a currency strategist with Bank of Singapore, highlighting concerns over the UK's fiscal path as it navigates domestic political challenges.

(With inputs from agencies.)