- Pound (GBP) rose after Hunt scraps most of the mini-budget
- Will Truss keep her job?
- Euro (EUR) falls versus the pound but gains versus the USD
- German ZEW economic sentiment data is due
The Pound Euro (GBP/EUR) exchange rate is rising after gains in the previous session. The pair rose 0.5% yesterday, settling at €1.1542 after trading in a range between €1.1497 – €1.1660 across the session. At 05:45 UTC, GBP/EUR trades +0.19% at €1.1565.
The pound surged higher against its major peers on Monday after the new Chancellor of the Exchequer, Jeremy Hunt, reversed PM Liz Truss’ economic plan. Hunt scaled back the vast energy subsidies putting an end to the scheme in place for April next year. He also rolled back almost all of the tax cuts in one of the largest U-turns in UK history.
The move has stemmed losses in the gilt market, which staged a recovery as the Bank of England withdrew support from the bond market. Yields on the 10-year gilt fell below 4%. The pound jumped higher as confidence in the UK improved.
Today there is no high impacting UK economic data. Attention will remain on Westminster as doubts over Liz Truss’ ability to keep her job grow. It would appear that Hunt is running the country rather than Truss. The opposition Labour is calling for a general election. According to the polls, Labour has the strongest lead over the Conservatives since 1997.
The euro slipped against the stronger pound in relatively quiet trade. Italian inflation was downwardly revised to 9.4% year on year, down from 9.5%, a 37-year high. Inflation across the bloc remains elevated as energy prices remain elevated.
Today attention will be on the German ZEW economic sentiment data, which is expected to show a further deterioration in economic morale in the eurozone’s largest economy.
The data comes after figures earlier in the month showed that German consumer confidence hit a record low. The inflation outlook remains bleak, and the energy crisis is expected to worsen as the winter months approach.