Pound Sterling (GBP) Trends Higher after UK Tax Credit Cuts Scrapped
Pundits were surprised to find that George Osborne’s Autumn Statement was not quite as severe as had been anticipated, with the reversal of controversial tax credit changes and reduced spending cuts in several areas. Consequently the GBP/EUR exchange rate rallied strongly to reach a daily best of 1.4274, before trending somewhat lower on Thursday morning as economists continue to dissect the fine print of this latest budget.
Despite market caution ahead of Chancellor George Osborne’s Autumn Statement, the GBP/EUR exchange rate has been on an uptrend this morning after UK housing loans were shown to have risen above expectations in October.
Dovish BoE Comments set GBP/EUR Exchange Rate on Downtrend, Euro Bolstered by Strong German Business Sentiment
Traders who had been hoping for a greater degree of hawkishness from Bank of England (BoE) Governor Mark Carney were largely disappointed yesterday, as the policymaker failed to offer any particular clarification as to when interest rates might be expected to begin rising once more. Already weakened by an unexpected low CBI Reported Sales figure, which declined from 19 to 7 in November, the Pound (GBP) was pushed lower as BoE policymakers speaking before a parliamentary committee showed no inclination to vote for a change in monetary policy in the near-future. Chief economist Andy Haldane proved particularly dovish, reaffirming his previous suggestion that rates could as easily be cut as raised.
Sentiment towards the Euro (EUR) was bolstered on Tuesday by a wave of risk aversion triggered by the downing of a Russian plane on the Turkish-Syrian border, with fresh geopolitical tensions driving up demand for safe-haven assets. Despite the confirmation of a weaker than hoped third quarter German GDP, investors were encouraged by a surprisingly strong German IFO Business Sentiment Survey, which demonstrated that confidence within the Eurozone’s powerhouse economy was on the rise.
Pound Sterling Currency News: GBP Trending Cautiously in advance of UK’s Autumn Statement Today
Focus has shifted today towards the Autumn Statement to be delivered by the UK’s Chancellor of the Exchequer George Osborne, which is expected to reveal a heavy round of austerity measures and spending cuts. Pundits have been displaying some reluctance to buy into the Pound ahead of the statement, as doubts circulate as to the impact of Osborne’s revised measures and plans to eliminate the nation’s deficit within the next five years. As such the GBP/EUR exchange rate has been experiencing a strong degree of volatility overnight, being shored up somewhat this morning by a more bullish October BBA Loans for House Purchase figure.
After a stronger third quarter US GDP yesterday the odds of an imminent interest rate hike from the Federal Open Market Committee (FOMC) have been on the rise, weighing somewhat on the strength of the single currency. With expectations for more strong US data in the afternoon, with both Durable Goods Orders and Personal Consumption Expenditure Core figures predicted to show improvement on the month, the Euro is likely to remain softened.
GBP/EUR Exchange Rate Forecast: Pound Volatility Predicted ahead of UK GDP Report
Tomorrow’s German GfK Consumer Confidence Survey is forecast to show a slight dip on the month for December, a possible reminder that the domestic economy is not a strong as might have been hoped. Should this follow the IFO surveys in bettering expectations, however, the Euro may return to a more bullish form, particularly as US markets close for Thanksgiving.
Movement for the Pound is likely to hold a more volatile trend in advance of Friday’s third quarter UK GDP report. Evidence of more limited economic growth will offer little incentive to favour Sterling, with the chances of a near-term BoE interest rate move set to decline further if growth in the UK proves unimpressive.
Current GBP, EUR Exchange Rates
At time of writing, the Pound Sterling to Euro (GBP/EUR) exchange rate was trending higher in the range of 1.4198, while the Euro to Pound Sterling (EUR/GBP) pairing slumped in the region of 0.7042.