• Pound (GBP) rises for a second straight day
  • Chancellor’s Budget is due tomorrow
  • Euro (EUR) looks to ECB Lagarde’s speech
  • German PPI fell -11%

The Pound Euro (GBP/EUR) exchange rate is rising for a second straight day. The pair rose +0.07% in the previous session, settling on Monday at €1.1428 and trading in a range between €1.1406 – €1.1441. At 09:00 UTC, GBP/EUR trades +0.18% at €1.1448.

The pound is pushing higher for the second straight day as investors digest the latest borrowing data from the UK.

The latest data from the Office of National Statistics confirms that pressure remains on public finances ahead of the autumn statement. The UK government borrowed £14.9 billion in October, which was ahead of expectations and the second-highest figure for the month since official records began.

Meanwhile, in the seven months to October, the deficit was £98.3 billion, which was £21.9 billion more than the same seven-month period in 2022 but less than forecast by the Office of Budget Responsibility in March.

The data comes as Chancellor Jeremy Hunt is under pressure from his conservative party members to cut taxes in his Autumn Statement tomorrow.

However, it’s worth pointing out that inflation in the UK remains over twice the Bank of England’s target, and tax cuts would be inflationary. It was just over a year ago that Liz Truss’s mini-budget sent the pound to a record low versus the USD.

Meanwhile, the euro is falling for a second straight day. The euro fell yesterday after German producer price index fell 11% year on year in October, down from -14.7% in September. This marked the fourth straight decline for the PPI owing to shrinking energy and metal prices.

The data bodes well for further decline in consumer price inflation which cooled to 2.9% year on year in October.

Attention now turns to European Central Bank president Christine Lagarde, who will speak later today. Any comments relating to the economic outlook, inflation or interest rates could influence fire appetite.

In recent speeches, ECB president Christine Lagarde has dismissed discussions about rate cuts, saying that the central bank would not start discussions around rate cuts for another two quarters.