GBP/USD slips near 1.3150 as UK government drops plans to raise tax rates

• GBP/USD depreciates as the Pound Sterling weakens amid growing concerns over the UK's fiscal discipline and political stability.
• The UK government has scrapped plans to raise income-tax rates ahead of the November 26 budget.
• The US Dollar also declines as economic caution outweighs improved sentiment after the US government shutdown ended.

GBP/USD retraces its recent gains from the previous session, trading around 1.3150 during the Asian hours on Friday. The pair depreciates as the Pound Sterling (GBP) declines amid rising concerns over fiscal discipline and political stability in the United Kingdom (UK).

The Financial Times reported that the UK government has dropped plans to raise income-tax rates ahead of the November 26 budget. Prime Minister Keir Starmer and Chancellor Rachel Reeves abandoned earlier proposals to increase basic and higher tax bands, choosing instead to pursue less direct revenue measures to address a £30 billion fiscal shortfall.

The British Pound remains under pressure as softer-than-expected economic data have strengthened expectations of a Bank of England (BoE) rate cut in December. The UK economy posted only modest growth in Q3, while September GDP fell on a monthly basis.

The downside of the GBP/USD pair could be restrained as the US Dollar (USD) struggles, with economic caution in the United States (US) overshadowing improved sentiment after the shutdown's end.

National Economic Council Director Kevin Hassett cautioned that some October data may "never materialize," as several agencies were unable to gather information during the shutdown. Initial private-sector reports suggest a cooling labor market and wavering consumer confidence, with persistent concerns about inflation. US President Donald Trump signed the government funding bill on Thursday, marking the official end of the record 43-day government shutdown in US history.