Core Viewpoint - The upcoming UK budget announcement on November 26 is unlikely to be favorable for the British pound, regardless of the government's efforts to balance the budget [1]. Group 1: Economic Context - The UK is facing challenges such as weak business investment, rising unemployment, and slowing economic growth, which have contributed to the decline of the pound against the dollar [4]. - The unemployment rate has reached its highest level since the pandemic, further pressuring the pound [4]. - Inflation remains a concern, with the current consumer price inflation rate at 3.8%, nearly double the Bank of England's target [8]. Group 2: Fiscal Policy Implications - If Chancellor Rachel Reeves opts for significant tax increases to avoid higher yields demanded by bond traders, it may hinder economic growth and lead to a further decline in the pound [1]. - Reeves' recent comments suggest tax increases are imminent, which caused the pound to drop to a seven-month low against the dollar [5]. - The need for Reeves to create a substantial fiscal buffer to avoid spending cuts or further tax increases is critical for breaking the cycle of weak economic growth and damaging fiscal policies [4]. Group 3: Market Sentiment and Predictions - Analysts express skepticism about the pound's recovery, with some maintaining short positions against the dollar due to anticipated interest rate cuts by the Bank of England [3]. - The options market reflects bearish sentiment, with traders betting on continued declines in the pound over the next month to a year [5]. - Despite potential short-term gains from profit-taking before the budget announcement, the long-term outlook for the pound remains pessimistic due to economic weakness and impending fiscal tightening [8].