The British pound continues to decline, which can be explained by the tough stance taken by the UK Chancellor of the Exchequer, Rachel Reeves. Yesterday, she refused to reaffirm the Labor Party's stated commitment to avoiding large-scale tax increases and made an unusual appeal to the British public to support her upcoming budget.

In her speech on Downing Street, Reeves stated that her priorities would be lowering borrowing costs and reducing inflation. She also blamed the previous Conservative administration for placing prolonged pressure on public finances, citing austerity policies and the UK's withdrawal from the European Union.

Investors, accustomed to softer rhetoric and promises of stability, interpreted Reeves's statement as a signal of forthcoming economic shifts. The lack of clear assurances on tax policy has generated a wave of uncertainty, pushing the pound sterling to new lows. Her refusal to take a firm position on taxation ahead of the budget session gives the impression that the government is preparing for unpopular measures, which in turn undermines confidence in Labour's economic strategy.

Reeves said that "the world has changed" since Prime Minister Keir Starmer came to power in July 2024, marking the clearest indication yet that the Labour government may compromise on its earlier pledge not to alter the UK's core tax levers. She argued that the party now faces more serious fiscal obligations, which will likely lead to tax increases ahead of the budget presentation in Parliament on November 26.

"We were elected to put the interests of the country above party interests — the national interest above political calculations," Reeves said. "My efforts will be focused on reducing NHS waiting lists, improving living standards, and cutting the national debt."

Experts note that Reeves's remarks broke with long-standing convention — chancellors usually say as little as possible about their budget plans before presenting them officially to the House of Commons.

It's worth noting that Reeves is facing a number of fiscal challenges, including higher borrowing costs, expensive policy reversals, and a significant downward revision of the UK's growth outlook by the Office for Budget Responsibility (OBR). The Chancellor is now working on a politically sensitive package of tax hikes and spending cuts to close a £35 billion budget gap — all at a time when Labour's approval ratings are rapidly falling.

A key problem for Reeves is Labour's main pre-election tax pledge, which rules out any increase in income tax, National Insurance, or VAT for ordinary citizens.

GBP/USD Technical Outlook

From a technical standpoint, GBP/USD buyers need to reclaim the nearest resistance at 1.3060. Only a breakout above this level would allow them to target 1.3090, though breaking higher will be quite challenging. The final upward target would be around 1.3130.

If the pair falls, bears will attempt to regain control below 1.3000. A confirmed breakout below this range would deal a serious blow to bullish positions and push GBP/USD down toward 1.2965, with the potential to reach 1.2930.