Pound euro (GBP/EUR) continues to dip following UK budget
(Updated 14:30, 30/10/24) The pound euro (GBP/EUR) exchange rate has continued on its downward trajetciry moving into this afternoon’s European session following the publication of the UK’s latest Autumn Budget.
The UK Chancellor Rachel Reeves revealed a slew of expected tax rises to the tune of £40bn in her budget earlier this afternoon, which saw the pound (GBP) begin to slump in the immediate aftermath of the release.
However, Sterling has managed to regain ground against several of its counterparts this afternoon, supported by an increase to UK borrowing which could fuel inflation and in turn undermine Bank of England (BoE) interest rate cuts.
Turning to the euro (EUR), Germany’s latest inflation data has lent the single currency further support this afternoon as October’s yearly index revealed a warmer than expected reading, printing at the highest level in three months.
At the time of writing, GBP/EUR is trading at around $1.2002, down roughly 0.2% from today’s opening levels.
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Pound euro exchange rate dented as Germany avoids recession
The pound euro (GBP/EUR) exchange rate is trending lower this morning following the publication of both the Eurozone’s and Germany’s latest GDP readings.
At the time of writing, GBP/EUR is trading at around €1.1991, down roughly 0.3% from this morning’s opening levels.
Euro (EUR) jumps to weekly high following forecast beating data
The euro (EUR) is strengthening against the majority of its peers this morning, and has climbed to just over a weekly high, following the publication of Germany’s and the Eurozone’s latest GDP readings.
GDP in the Eurozone’s largest economy came in above market expectations for the third quarter of 2024, rising from -0.1% up to 0.2%, ahead of forecasts it would remain at -0.1%, and saw Germany avoid slipping into a technical recession.
The Eurozone’s GDP reading for the same time period also came in better than expected and rose from 0.2% to 0.4%, rather than remaining at 0.2% as forecast, underpinning the common currency further.
The latest data has seen European Central Bank (ECB) interest rate cut bets dimmish, with the odds of a 50-basis point rate cut in December declining from 45% to 22%, bolstering the single currency.
Pound (GBP) firms ahead of Autumn Budget
While down against the euro, the pound (GBP) is managing to tick up against the remainder of its peers as markets await the UK’s hotly anticipated Autumn Budget.
Scheduled for release this afternoon, the UK Chancellor Rachel Reeves is expected to deliver the contents of her fiscal plans for the UK.
In recent weeks, investors have grown fearful over the Chancellor’s upcoming Budget, with the Labour government warning of ‘painful decisions’ in relation to tax hikes.
However, more recently, Reeves has said she will introduce several new measures to boost UK investment in order to help ‘rebuild Britain’, which was welcomed by markets.
Investors will be eyeing up the upcoming release for the full scope of the Chancellor’s financial plans, which will likely infuse significant volatility into GBP exchange rates should markets deem her Budget as negative.
Pound euro exchange rate forecast: Eurozone inflation in the spotlight?
Looking ahead, the primary driver of movement for the pound euro exchange rate looking ahead to tomorrow will likely be the publication of the Eurozone’s latest inflation data.
With this month’s CPI data forecast to paint a mixed picture, with headline inflation expected to cool while core inflation is forecast to warm, the single currency could waver following the release.
Turning to the pound, UK data will be absent from tomorrow’s data calendar which will likely leave Sterling trading on the back of today’s Budget announcement.
Should Reeve’s plans be welcomed by markets, GBP exchange rates will likely rally. However, should the Chancellor fail to convince markets of her financial projections, Sterling could plunge against its peers.