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Pound Sterling recovers slightly as UK fiscal hole narrows to £20 billion

November 14, 2025

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The Pound Sterling rebounds marginally as the UK OBR reported that the £30 billion fiscal gap has narrowed to £20 billion.
Weak UK economic data has supported bets of another interest-rate cut by the BoE.
The US Bureau of Labor Statistics said it will publish delayed economic data soon, but the exact timing isn’t available yet.

The Pound Sterling (GBP) recovers some of its earlier losses against its major peers during the European trading session on Friday. The British currency attracts some bids as the United Kingdom (UK) Office for Budget Responsibility (OBR) has reported that stronger receipts and robust wage performance have narrowed the £30 billion fiscal gap to £20 billion.

A modest improvement in the UK economy’s fiscal position has led to a slight decline in surging gilt yields, some recovery in the Pound Sterling, and relief for policymakers. At the time of writing, 10-year UK gilt yields have dropped to 4.51% from THEIR intraday high of 4.56%. Still, they are 1.8% higher than their previous close.

Earlier in the day, 10-year UK gilt yields soared, weighing on the British currency, following reports from the Financial Times (FT) signaling that Prime Minister Keir Starmer and Chancellor of the Exchequer Rachel Reeves might scrap their plans to raise basic and higher tax bands in the upcoming Autumn Budget on November 26.

The FT reported that the UK government could avoid increasing the burden on individuals and might look for other non-direct revenues to cover the £30 billion fiscal gap.

A few weeks ago, Reeves stated that the administration might need to reconsider its election manifesto’s promise not to hike households’ taxes to fund the stopgap bill.

The absence of tax hikes could prompt fiscal debt risks by increasing interest obligations on the government’s debt.