Pound slips further from one-month high ahead of budget

The British pound edged lower against the dollar on Wednesday, but remained close to a one-month high, ahead of finance minister Jeremy Hunt's Spring Budget.

Hunt is set to detail plans try to speed up the world's sixth-biggest economy after the shocks of Brexit, a heavy COVID-19 hit and double-digit inflation left it lagging behind its peers. However, he has already ruled out a major spending spree or large-scale tax cuts.

Therefore, analysts are not expecting a repeat of last September's volatility when then finance minister Kwasi Kwarteng announced uncosted spending plans, sending the pound to a record low against the dollar of $1.0327.

"We doubt the Budget today will spur a meaningful positive or negative reaction in the pound," said George Vessey, FX and macro strategist at Convera.

The pound was last down 0.3% at $1.2118, having hit a one-month high of $1.2203 on Tuesday.

The euro was down 0.2% against sterling to 88.08 pence.

Markets were generally calmer after the recent turbulence, as investors grappled with the fallout from the collapse of U.S. tech lender Silicon Valley Bank (SVB) and the impact that might have on monetary policy.

Markets are currently pricing in around 16 basis points of tightening at the Bank of England's (BoE) March meeting, implying around a 67% chance of a 25 basis point hike and a 33% chance it will keep the Bank rate unchanged.

Last week, the chance of a BoE rate pause stood at around 10%.

Goldman Sachs analysts maintained their view for a 25 basis point rate hike, but said it was a "close call" and saw a lower hurdle for a pause, given the recent policy commentary and the "significant drag" from higher policy rates already in train.