Gloomy Spring Statement Dents GBP Demand

Gloomy Spring Statement Dents GBP Demand

Wednesday 26th March 2025 – 14:22 (GMT)

Chancellor Rachel Reeves’ latest Spring Statement has had a notable impact on financial markets, with the pound depreciating against major currencies as investors assessed the implications of revised economic forecasts and fiscal policy measures.

The Office for Budget Responsibility (OBR) has downgraded the UK’s growth outlook for 2025, halving its forecast from 2% to 1%. The downward revision reflects the ongoing economic challenges facing the country and has weighed on investor sentiment.

Among the key fiscal announcements, Reeves unveiled a £3.4 billion reduction in welfare spending and plans to cut at least 10,000 civil service jobs—measures aimed at addressing fiscal pressures but likely to generate debate over their potential economic impact. Meanwhile, the government has committed an additional £2.2 billion to defence, underscoring its strategic priorities in an increasingly uncertain geopolitical landscape.

GBP demand fell sharply during the Chancellors speech, with key levels of resistance broken against USD and heavily tested versus the euro. Gilt yields also declined, suggesting a shift in market expectations regarding monetary policy and economic growth. The combination of austerity measures and a more subdued outlook has led to increased caution among investors, with markets recalibrating their expectations for the UK’s economic trajectory.