- Pound (GBP) falls after gains last week
- UK Q2 GDP is revised lower to 0.5% QoQ
- Euro (EUR) rises ahead of German inflation data
- The ECB is expected to cut rates again in October
The Pound Euro (GBP/EUR) exchange rate is falling on Monday after gains last week. The pair rose +0.39% on Thursday, settling at €1.1989 and trading in a range between €1.1918 and €1.2025. Today GBP/EUR trades -0.08% at €1.1970.
The pound is falling on Monday, a downward revision she mute GDP in a blow to Keir Starmer. According to the Office of National Statistics, the UK economy grew more slowly in Q2 at 0.5%, a downward revision from the previous estimate of 0.6% and following growth of 0.7% in the first quarter
the data will be a blow for newly elected Labour Prime Minister Keir Starmer, who is counting on fast growth to help deliver improvements to public services that he promised to voters.
The Bank of England expects the UK economy to grow just 0.3% in the current quarter, further evidence that the economy has lost momentum since Labour came to power in July.
A level of caution is present ahead of Chancellor Rachel Reeves’s budget on October 30th. She’s widely expected to announce tax rises and spending cuts to fill a black hole left by the conservatives. However, if the chancellor hikes taxes too far, this could further hinder growth.
The euro is heading higher as attention turns to German inflation figures later today. Economists expect inflation, as measured by the consumer price index, to fall to 1.7% year on year in September, down from 1.9% in August and below the ECB’s target rate of 2%.
The data, along with weaker-than-expected inflation from France and Spain last week, comes ahead of eurozone inflation figures tomorrow and could support a further 25 basis point rate cut from the ECB in October.
The market is pricing in a 25-basis-point rate cut at every meeting from now until June 2025, which could limit gains in the euro.