Pound to Euro hits a 6-month low in the lead up to the Autumn Statement
Last week the Pound to Euro exchange rate dropped as low as 1.1410 before recovering slightly, with this level being the lowest for GBP/EUR in just over 6-months.
The weakening of the Pound against the Euro is in contrast to the GBP/USD rate, as the Pound has been climbing against the US Dollar mostly owing to US Dollar weakness.
Inflation data released last week showed a steep decline and on Friday Retail Sales data out of the UK for October showed a contraction of -0.3% when there was an expectation of 0.5% growth.
The fall in inflation levels along with the slowdown in economic growth has resulted in a different approach from the Bank of England in terms of monetary policy.
Previously there were expectations of the base rate of interest remaining above 5% throughout 2024, and the BoE was expected to keep interest rates ‘higher for longer’ than the Fed Reserve in the US and the European Central Bank (ECB) in the Eurozone.
The forecasting has now changed with an interest rate cut from the BoE expected to take place by early May (50% probability at the time of writing) and there could be a cut as soon as March according to some analysts (20% probability).
Moving forward, the interest rate amendments and predictions of the BoE’s next moves will be key for the Pound and could determine the currency’s next moves.
In the short term I think that Wednesday’s Autumn Statement could provide the Pound with some direction. According to polls the Conservative government are trailing labour quite considerably, and this Budget could be the last one before a general election is called so the UK Chancellor (Jeremy Hunt) may look to try and garner some support from the UK public.
With the economy performing the way it is, there isn’t much wiggle room but in the lead up the focus has been on inheritance and income tax reductions.
The post Pound to Euro hits a 6-month low in the lead up to the Autumn Statement appeared first on Pound Sterling Forecast.
Source: https://www.poundsterlingforecast.com/2023/11/pound-to-euro-hits-a-6-month-low-in-the-lead-up-to-the-autumn-statement/
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