The British pound gained against the US dollar on Monday. This rise was driven by both a weakening dollar and cautious optimism regarding the UK government’s spending plan to be announced this week. Investors are closely watching the economic agenda to be announced this week; Because this plan could outline the framework for fiscal policies that could extend into the second half of the decade.
British Pounds Supported by Dollar Weakness and Economic Resilience
British Pounds Rise About 0.4% to $1.3575. This follows the dollar, which had strengthened on Friday due to strong US employment data, losing momentum due to subsequent political uncertainties. Market participants have begun to reassess the potential economic impact of the uncertain policy environment under President Donald Trump’s administration. The overall weakness of the dollar throughout 2025 contributed to the pound gaining approximately 8% in value. However, the resilience of the UK economy despite global uncertainties is also supporting the pound. The pound remained largely unchanged against the euro, staying stable at 84.21 pence. This situation reflects relative stability ahead of important economic data to be released later in the week.
Eyes on the UK’s Spending Plan and Debt Outlook
Now, attention has turned to the fiscal update on Wednesday. The Labour-led government is expected to announce its ministerial budgets extending until 2029. This plan will determine the direction of public spending and will be closely scrutinized by investors, particularly in terms of the messages regarding government debt.
The credibility of the UK’s long-term fiscal policies is being questioned, as the high level of debt severely restricts the government’s room for maneuver against future economic shocks.
Economy Sends Mixed Signals, Public Demands More
Recent data shows that the UK economy in 2024 This shows that the economy is beginning to recover from the sluggish final quarter of the year. First-quarter GDP data exceeded expectations, and business confidence painted a more positive picture. However, Finance Minister Rachel Reeves acknowledged that the public remains cautious and wants to see more tangible improvements in living standards. April employment, economic output, and industrial production data, to be released this week, are not expected to have a major impact on the overall outlook. Kit Juckes, chief currency strategist at Société Générale, said, “There’s a sense of fragility beneath the surface.” “The economy isn’t collapsing, but it’s not gaining momentum either. Our room for fiscal expansion is limited, and that makes the pound vulnerable.”
Wage Increases Support the Pound
According to Juckes, a notable positive development has been the steady wage increases in key sectors. Despite the overall economic slowdown, rising wages have boosted consumer spending, particularly in the retail and food and beverage sectors. “People are going to shops and restaurants and spending money — not because the economy is booming, but because wages are rising, albeit slowly,” says Juckes. “This dynamic has disappointed bear market advocates who were expecting a sharper decline in the pound.”
Looking Ahead
While market sentiment favors the pound in the short term, analysts remain cautious in the long term. The future performance of the pound will largely depend on the UK government’s management of fiscal discipline, its ability to maintain investor confidence, and its capacity to balance economic stagnation with public welfare expectations.
For now, the pound appears to be in a strong position. However, in the coming months, its performance will depend not only on the weakness of the dollar but also on the quality of domestic policies.
