- Pound (GBP) rose on reports of a possible budget U-turn
- Will the BoE stick to the deadline?
- Euro (EUR) rises after strong German wholesale inflation
- Eurozone trade balance due
The Pound Euro (GBP/EUR) exchange rate is edging lower after strong gains in the previous session. The pair rose 1.3% yesterday, settling at €1.1585 after trading in a range between €1.1403 – €1.1619 across the session. At 08:45 UTC, GBP/EUR trades -0.16% at €1.1567.
The pound is edging lower after rallying over 2.5% across the past two sessions on optimism that the Chancellor could reveal a U-turn in the mini-budget. The Chancellor played the highly unusual move of leaving the IMF meeting early to return to discuss the future of his min-budget which is unraveling.
At the same time, the BoE’s hard deadline for pensions to shore up their positions appears to be working. The central bank brought £4.68 billion in bond on Thursday and could buy even more today.
The pound will be watching developments at Westminster closely, with speculation growing that the government could ditch backtrack and raise corporation tax as previously planned. Any such announcement could help the pound push higher. However, should the Chancellor fail to make an announcement, concerns over what will happen on Monday could pull the pound lower.
No backstop support from the BoE and no announcement of a U-turn from the Chancellor could mean another selloff in bonds at the start of next week.
There is no high-impacting UK economic data due today.
The euro is edging higher after wholesale inflation data from Germany jumped higher to 19.9% year on year, up from 18.9% in August. The data suggests that consumer prices are unlikely to slow any time soon.
With consumer inflation at a record high the data adds pressure to the ECB to hike interest rates aggressively later this month. The central bank is widely expected to hike rates by 75 basis points.
Looking ahead, the Eurozone trade balance will be under the spotlight.