Sterling Rebounds Amid Bond Market Chaos Ahead of UK's Autumn Budget

Sterling bounced back from a recent four-week low on Wednesday, with traders cautiously examining the ramifications of a turbulent two-day bond market that emphasized Britain's fiscal hurdles as the government readies its annual budget. The bond market upheaval saw long-term government borrowing costs, including Britain's 30-year bond yields, soar to multi-year highs, sparking concerns over the fiscal stability of major economies. However, a semblance of stability returned following a sharp selloff.

Britain's 30-year borrowing costs rose to their highest since 1998, potentially pressuring the pound, which dropped over 1% on Tuesday. Yet, the currency last saw an uptick of 0.17% at $1.3416 against the dollar and edged 0.06% higher against the euro to 86.86 pence, remaining near its recent lows against the single currency.

As investors anticipate finance minister Rachel Reeves's upcoming autumn budget on November 26, expectations of tax increases are increasing amid fiscal targets and economic growth challenges. Optimism exists for surprising outcomes in the budget, despite widespread pessimism. A report highlighted Britain's services sector's growth due to new business growth and eased tariff concerns, but tax rise prospects continue to worry firms.

(With inputs from agencies.)