Pound whipsaws after surprise UK fiscal leak; Antipodeans rally as RBNZ cuts and Aussie CPI runs hot, yen soft on BOJ hike risk
Sterling surged then reversed after the UK’s watchdog published its Budget outlook hours early, while AUD and NZD advanced on divergent policy signals across the Tasman. Yen stayed under pressure as markets priced a higher chance of a Bank of Japan hike as soon as December, with U.S. yields and equities edging higher into the open.
Market snapshot
- GBPUSD spiked above 1.3200 before sliding to around 1.3136; UK 10-year gilt yields rebounded toward 4.53%.
- USD mixed: slightly firmer versus JPY (about +0.27%), little changed against EUR and GBP.
- NZDUSD jumped roughly 0.87% after the RBNZ cut rates but signaled the easing cycle may be nearly done.
- AUDUSD rose about 0.42% as Australia’s monthly CPI beat lifted RBA “higher-for-longer” expectations.
- U.S. equity futures higher: Dow +30, S&P +14, Nasdaq +96; Treasury yields a touch firmer with 10-year near 4.01%.
UK fiscal leak rattles sterling and gilts
The UK’s Office for Budget Responsibility released its full outlook early “due to a technical issue,” projecting the government will run a £21.7 billion surplus by 2029–30—more than double March’s £9.9 billion headroom. The document sketches a tax-heavy Budget featuring a three-year extension of frozen personal thresholds (raising roughly £8 billion), higher dividend/property/savings tax rates (£2.1 billion), NICs on salary-sacrifice pensions (£4.7 billion), and an aggregate £14.9 billion boost to personal-tax receipts.
Other measures include a new property levy on homes above £2 million, EV and plug-in hybrid taxes from April 2028 (about £1.4 billion), and gambling-tax changes (£1.1 billion). Despite tighter taxes, spending rises every year, up by roughly £11 billion by 2029–30. The OBR now assigns a 59% probability of meeting fiscal targets (vs. 54%), sees 2025 GDP at 1.5% (trimmed to 1.4% in 2026), inflation around 3.5% next year and back to 2% by 2027, with debt stabilizing near 95–96% of GDP.
Markets balked at the premature release: GBPUSD briefly pierced 1.3200 before reversing to 1.3136, while 10-year gilts rose from roughly 4.43% to 4.53%. The policy mix—higher taxes alongside rising spend—adds to uncertainty for growth-sensitive UK assets, and traders are paring bullish sterling bets into the Budget risk.
NZD pops as RBNZ trims OCR but hints at “last cut”
The Reserve Bank of New Zealand lowered the Official Cash Rate by 25 bps to 2.25% in a 5–1 decision, citing spare capacity that should pull inflation back toward 2% by mid-2026. Projections were nudged lower, with the OCR seen at 2.25% in March 2026 (previously 2.55%) and 2.28% in December 2026 (previously 2.62%). Despite easing, the Bank emphasized data dependence and noted additional reductions would aim to support confidence and guard against a slower-than-desired recovery.
NZDUSD rallied on the perception the Bank is near the end of its cutting cycle, making it the session’s standout in G10 FX. Even so, the pair met sellers near the 0.5680–0.5691 resistance zone (around the 50% retracement of the late-October decline), with a high near 0.5696. A clear break above that band would strengthen the topside trend; failure could keep ranges intact near term.
Yen stays heavy as BOJ telegraphs December hike risk
A Reuters report said the Bank of Japan has hardened its messaging to keep a December rate hike on the table, with yen weakness increasingly seen as an inflation risk. A meeting between Prime Minister Sanae Takaichi and Governor Kazuo Ueda was interpreted as easing political friction to further normalization. While timing could hinge on the Federal Reserve’s meeting a week earlier, growing board support suggests the window for inaction is narrowing.
The USDJPY tone stays bid as traders weigh the prospect of only gradual BOJ tightening against persistent U.S.–Japan rate differentials. FX vol remains contained but skewed toward yen strength risk into year-end if the BOJ delivers.
Australia’s CPI tops forecasts; AUD catches a bid
Australia’s new primary inflation gauge, the Monthly CPI, printed hotter than expected at 0.0% m/m (vs. -0.2% consensus) and 3.8% y/y (vs. 3.6%). Underlying measures firmed: the trimmed mean rose to 3.3% y/y and the weighted median hit 3.4% y/y. The beat reinforces a higher-for-longer RBA profile and lifted AUDUSD by roughly 0.42% as traders marked down the odds of near-term cuts.
U.S. equities and yields edge higher
Risk appetite was constructive into the U.S. open: Dow futures +30, S&P +14, Nasdaq +96. Treasury yields ticked up with the 2-year at 3.471% (+1.2 bp), 5-year 3.572% (+0.7 bp), 10-year 4.007% (+0.6 bp), and 30-year 4.659% (+0.2 bp). The modest bear-steepening supports USDJPY on dips while leaving EURUSD largely rangebound.
Trading takeaways
- GBP: Volatility likely elevated into the Budget; watch 1.3200 topside and 1.3100/1.3050 support zones.
- NZD: “Last cut” narrative favors dip-buying unless 0.5680–0.5691 continues to cap.
- JPY: December BOJ risk is real, but a shallow path tempers yen upside; Fed guidance remains pivotal.
- AUD: Stickier inflation underpins AUD on crosses; data sensitivity high with Monthly CPI now in focus.
Frequently Asked Questions
Why did GBPUSD reverse after the initial jump?
The early release of the OBR’s outlook sparked an algorithmic knee-jerk higher, but details of a tax-heavy fiscal path and a rebound in gilt yields pressured sterling, sending GBPUSD back below 1.3200 toward 1.3136.
Does the RBNZ rate cut mean more easing is coming?
Not necessarily. The Bank signaled it is closer to the end of its cycle, with projections shifted lower but a strong emphasis on data dependence. Markets interpreted the decision as a potential “last cut,” lifting NZD.
Could the Bank of Japan hike in December?
Yes. Officials have adopted a more hawkish tone, citing yen-driven inflation risks, and political resistance appears to have eased. The decision may hinge on global conditions and the Fed’s meeting, but December is live.
What does Australia’s hotter CPI imply for the RBA and AUD?
With headline and core inflation exceeding expectations, the RBA’s higher-for-longer stance is reinforced. That supports AUD on dips and reduces odds of near-term rate cuts.
How are U.S. rates shaping FX today?
Slightly higher Treasury yields are supporting USDJPY, while broader dollar moves are mixed. Risk-on equity futures are helping pro-cyclical currencies like AUD and NZD outperform.
This article was produced by BPayNews for informational purposes and does not constitute investment advice.
Last updated on November 26th, 2025 at 01:11 pm
