- Pound (GBP) is edging higher after a flat finish yesterday
- The IMF upwardly revised growth to 1.1% this year
- Euro (EUR) is falling after the IMF downwardly revised growth
- Germany is expected to underperform
The Pound Euro (GBP/EUR) exchange rate is edging higher on Tuesday after a flat finish on Monday. The pair fell -0.02% in the previous session, settling on Monday at €1.2004 and trading in a range between €1.1986 and €1.2014. At 18:00 UTC, GBP/EUR trades +0.02% at €1.2008.
The pound was slightly higher on Tuesday as the market considered rising government borrowing and the International Monetary Fund’s upgrade to the UK growth forecast.
The IMF upwardly revised the growth outlook for the UK and now expects the UK to grow by 1.1% this year, up from 0.7% in its forecast 3 months ago. This puts the UK in the middle of the park of global nations
In economic news, the UK government borrowing reached £16.6 billion in September, marking the third highest figure for the month since records began in 1993. Not represented a 2.1 billion increase from the same period last year, add, exceeded the Office of Budget Responsibility’s forecast of 1£5.1 billion, although it was below market expectations of £17.4 billion. The higher level of borrowing restricts the chancellor’s ability to increase spending in the budget next week without raising taxes.
The euro was unmoved in a quiet day for economic data. The IMF warned of widening divergence between Europe and the US, which is expected to increase further. The IMFF also called for greater public investment in Europe in order to boost productivity and maintain competitiveness.
The IMF downgraded the growth outlook for the euro area, now predicting growth of just zero point 8% in 2024 and a 0.1% decrease compared to July. Meanwhile, the 2025 euro area growth outlook is expected to increase slightly to 1.2%, but this was a downward revision by 0.3%.
The IMF expects Germany and Italy, among the euro zone’s largest economies, to significantly underperform. Germany’s economy is forecast to contract by 0.3% this year with growth at 0% in 2025. Meanwhile, growth in Italy is expected to be 0.7% this year, with a slight decline to 0.6% in 2025.
