- Pound (GBP) is struggling as businesses worry ahead of the Budget
- The UK is preparing for large tax hikes
- Euro (EUR) is struggling for direction amid a quiet economic calendar
- ECB rate cut expectations could limit gains
The Pound Euro (GBP/EUR) exchange rate is edging lower on Monday after modest losses last week. The pair fell -0.04% in the previous week, settling on Friday at €1.2002 and trading in a range between €1.1976 and €1.2034. At 10:00 UTC, GBP/EUR trades -0.03% at €1.1998.
The pound is hanging lower as investors and Businesses show signs of pre-budget nerves. British business confidence dropped for A4 to a four-month low in October ahead of the first labour budget in over a decade, echoing signs of corporate nervousness about possible tax increases.
The Lloyds Bank business barometer, which represents the difference between the percentage of firms with positive and negative views, fell by three percentage points to 44%.
Prospects for the broader economy fell to the lowest level since March, although the overall index remained above its long-term average.
The day comes ahead of Wednesday’s budget, where the chancellor of the exchequer, Rachel Reeves, is widely expected to raise taxes and cut spending to raise £40 billion. Prime Minister Kier Starmer has warned over What is expected to be a difficult budget for many. While no rise in income tax will be 80 is expected, the prolonged freeze on income tax thresholds and an employer’s National Insurance hike are expected.
The euro struggles for a firm direction amid a quiet day for eurozone economic data. The array is being limited by current European Central Bank rate cut expectations.
Last week’s eurozone data, particularly the lackluster PMI figures published on Thursday, have supported expectations that the ECB will cut rates again when it meets in December.
The ECB has already cut rates three times since June, reducing the borrowing rate to 3.25% as Eurozone inflation remains below the central bank’s 2% target, amid growing concerns about the growth outlook in the region.