Financial traders in London's Canary Wharf described Rachel Reeves's first budget as 'a bit of a relief' after initial chaos caused by an accidental early release of official economic forecasts. The Office for Budget Responsibility (OBR) analysis leaked ahead of the chancellor's statement, triggering a flurry of activity on trading floors as investors scrambled to assess the implications.
The reaction on currency and bond markets was choppy but not dramatic, easing fears of a repeat of the Liz Truss 'mini-budget' debacle. The yield on the benchmark 10-year gilt dropped from 4.5% to about 4.42% after the leak, before recovering above 4.52%, and later falling back to 4.4% by late afternoon. The declining borrowing cost over the day suggested markets did not view lending to the UK as more risky.
Will Marsters, a sales trader at Saxo UK, noted: 'The tempered growth didn’t seem too optimistic, which eroded some of the risk premium.' Neil Wilson, an investor strategist at Saxo UK, added: 'There’s no great stinging surprise that has upset markets. That has allowed it to be a bit of a relief.' However, Wilson questioned the credibility of forecasts that rely on future fiscal restraint, given elections expected around the same time.
The pound also experienced volatile trading after the OBR leak, initially jumping before falling to $1.3124, then recovering to $1.3229 by late afternoon, a 0.5% increase for the day. Mike Owen, another sales trader, summed up the mood: 'Everyone was fearing the worst, so the price action is, “Phew”. It’s such a minefield to try to get through it.'
