FICC Focus FX Moment: Fiscal Strain Leaves No Way Out of Sterling Bear Trap
Nov 5, 2025
Laura Cooper, Managing Director and Head of Macro Credit at Nuveen, shares her insights on the precarious state of the UK fiscal policy and its impact on the sterling. She discusses how the upcoming November 26 budget puts pressure on the pound, predicting a challenging landscape for sterling bulls. Laura also explores the implications of fiscal tightening on growth and the likelihood of monetary policy changes from the Bank of England. Additionally, she touches on the recent dollar rebound and gives forecasts for the euro heading into 2026.
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UK Fiscal Dilemma Keeps Sterling Pressured
- The UK faces a fiscal pinch requiring roughly £35bn to fill, forcing difficult trade-offs between credibility and growth.
- Audrey Childe-Freeman says either fiscal tightening or weak credibility will keep sterling under pressure.
Fiscal Tightening Likely Forces Bigger BoE Easing
- Nuveen expects substantial fiscal consolidation that will weigh on UK growth and push the BoE to cut rates more than markets expect.
- Laura Cooper warns this dynamic is the main pressure valve for sterling going forward.
Wait Until Budget Before Long Sterling Bets
- Avoid taking long sterling positions before the Nov. 26 budget because the fiscal path must clear first.
- Audrey Childe-Freeman and Laura Cooper both say wait for the budget outcome before positioning.