GBP flows: GBP not much changed on Budget, positive reaction

UK yields are lower after the initial UK budget statement, reacting positively to the big tax increases and the planned increases in investment, despite a higher current budget deficit. GBP isn’t much changed, which can be considered a positive reaction given the decline in UK yields that we have seen. However, there is still potential for GBP to make gains if the risk premium that has persisted in GBP since the Truss budget in 2022 is reduced.  At this stage, we wouldn’t anticipate a large reaction, but see the budget as mildly GBP positive.