- Pound (GBP) rises ahead of inflation data & Spring Statement
- The Chancellor is only expected to announce limited measures
- Euro (EUR) edges lower despite upbeat ECB speakers
- Eurozone consumer confidence
The Pound Euro (GBP/EUR) exchange rate is heading higher on Wednesday for a fourth straight session. The pair gained 0.6% in the previous session, settling on Tuesday at €1.2019 and after trading a range between €1.1940 – €1.2039. At 05:45 UTC, GBP/EUR trades +0.15% at €1.2040.
The Pound pushed higher yesterday despite the latest public sector net borrowing data revealing that the British government borrowed more than forecast in February. The public sector net borrowing figure came in at £13.1 billion, well over the £8 billion forecast by the Office of Budget Responsibility. This is unlikely to concern Chancellor Rishi Sunak when he announces the Spring Statement today. Thanks to lower than forecast borrowing across previous months, he has headroom to spend to support households struggling with the surging cost of living.
The Chancellor is expected only to announce limited measures, preferring to keep the main giveaways from the October Budget.
Before the Budget, UK inflation is expected to rise to 5.9% yearly in February, up from 5.5% in January. Inflation is expected to keep rising as oil prices advance amid the Ukraine war’s fallout. Higher inflation could pressure the Bank of England to keep hiking rates.
The euro fell in the previous session despite encouraging comments from European Central Bank policymakers. Vice President Luis de Guindos said that he didn’t consider stagflation a concern for the eurozone. Even under the worst-case scenario, he sees growth of around 2% in the region. This was a similar line of argument to ECB President Christine Lagarde earlier in the week.
Today attention is turning to the eurozone consumer confidence, which is expected to fall in March amid the ongoing Russian war. Consumer morale is likely to fall to -12.3, down from -8.8.
