Pound Euro (GBP/EUR) Exchange Rate Slips as Investors Mull Autumn Statement
Article updated 15:42, 22/11/2023:
The Pound Euro (GBP/EUR) exchange rate began to weaken this afternoon, as UK Chancellor Jeremy Hunt’s budget underwhelmed.
While Hunt unveiled a series of tax cuts, such a 2% cut to national insurance, investors appear unmoved.
Alongside the Autumn Statement, the Office for Budget Responsibility (OBR) published their latest forecasts. The OBR revised its growth forecasts for the UK economy downward, from 1.8% to 1.6% growth.
Analysis of the budget proved less than optimistic, with the OBR themselves offering a diplomatic comment:
‘Delivering a 2.3 per cent a year real terms fall in day-to-day spending would present challenges. Performance indicators for public services continue to show signs of strain.’
With this in mind, investors appear hesitant to bet on Sterling as the UK’s outlook remains pessimistic at best.
At the time of writing, GBP/EUR is trading at around €1.1469, a fall of just under 0.2% from the morning’s opening levels.
Pound Euro (GBP/EUR) Exchange Rate Steady as Markets Await UK Budget
The Pound Euro (GBP/EUR) exchange rate is treading water today, as investors await the UK’s Autumn Statement.
At the time of writing, GBP/EUR is trading at around €1.1506, showing little movement from the morning’s opening rates.
Pound (GBP) Quiet Ahead of Autumn Statement
The Pound (GBP) is trading quietly today, as investors anticipate the release of UK Chancellor Jeremy Hunt’s Autumn Statement.
Hunt is expected to announce a package of tax cuts, amid rumours of a budget designed to jumpstart economic growth. National insurance contributions and business taxes are expected to be trimmed, alongside other investment measures for fledgling UK sectors.
Trepidation appears to be the main approach for investors ahead of this. The concern lingers that any tax cuts could stoke inflation, with cost pressures remaining ever-present for UK households and businesses.
However, the UK economy appears to be turning a corner, granting room for growth-boosting measures.
Laura Trott, Deputy at the Treasury, stated:
‘The economy is in a very different place to where we were a year ago and we can now focus on going for growth, pushing up the growth rate of the economy and cutting taxes for individuals.’
If Hunt’s budget proves convincing to markets, Sterling may rally in its wake.
Euro (EUR) Narrows as Investors Mull ECB Rate Cuts
The Euro (EUR) is trading within narrow boundaries today, amid a lack of impactful data releases. As such, the focus is remaining on the European Central Bank’s (ECB) path forward.
Owing to recent inflation data, investors are mulling the prospect of interest rate cuts. The Eurozone’s economy appears to be decelerating in tandem with inflation, as the ECB’s aggressive tightening cycle takes root.
Additionally, while ECB policymakers have aimed to diminish rate cut prospects, the bank is remaining open about the effects of its rate hikes.
ECB Vice President Luis de Guindos commented:
‘The weak economic outlook along with the consequences of high inflation are straining the ability of people, firms and governments to service their debt. It is critical that we remain vigilant as the economy transitions to an environment of higher interest rates coupled with growing uncertainties and geopolitical tensions.’
Elsewhere, a cautiously risk-on market mood is likely serving to temper the Euro today. As the common currency holds a safer stature, it may be struggling to climb against riskier assets.
Pound Euro Exchange Rate Forecast: Flash PMIs Take the Stage
Looking ahead for the Pound, tomorrow brings the release of November’s flash PMI data. Economists have forecast that activity in the UK’s vital service sector is to remained in contractionary territory, which could weaken Sterling.
Additionally, investors may continue to pore over Hunt’s Autumn Statement. If the budget proves enticing for markets by offering pro-growth measures, GBP could climb.
For the Euro, the latest Eurozone private sector indexes are scheduled for publication tomorrow. Improvements are forecast across the board, but for activity to still remain in contraction.
As such, EUR exchange rates may see mixed fortunes. However, if the outlook shows signs of brightening in the future, the common currency could gain ground.