Nov. 17, 2025 — Calm returned to British markets on Monday following last week’s sharp swings, with the pound slightly firmer against the euro and steady against the U.S. dollar, trading well above recent lows.

Markets were unsettled on Friday after reports that Finance Minister Rachel Reeves has no plans to raise income tax rates, a move investors had expected to help cover a potential fiscal shortfall. The news weighed on British government bonds and dragged the pound to its weakest level versus the euro since early 2023.

Monday saw a calmer mood: UK government bond yields fell, outperforming European peers, while the pound strengthened to 88.1 pence per euro, slightly recovering from its Friday high of 88.64 pence. Against the dollar, sterling was flat at $1.3166, with daily trading ranges narrower than the previous sessions.

Analysts caution that the calm could be temporary due to political uncertainties and upcoming economic data, particularly UK consumer inflation figures due Wednesday. Kit Juckes, chief FX strategist at Societe Generale, noted that a soft CPI reading could open the door for a 25-basis-point rate cut by the Bank of England in December, a move currently seen as likely by markets.

The Bank of England held rates steady in its latest meeting, though four of its monetary policy committee members had voted for a cut. Market expectations suggest roughly a 75% probability of a rate reduction in the next policy decision.