- Pound (GBP) is falling after gains yesterday
- BoE survey shows firms expect lower profits after Budget
- Euro (EUR) is rising after the French government collapses
- Eurozone retail sales fall -0.5% MoM
The Pound Euro (GBP/EUR) exchange rate is falling after gains yesterday. The pair settled +0.21% in the previous session, settling on Wednesday at €1.2080 and trading in a range between €1.2040 and €1.2092. At 16:00 UTC, GBP/EUR trades -0.15% at €1.2066.
The euro moving higher despite the French government collapsing. Prime Minister Michel Barnier and his fragile government lost a vote of no confidence with a majority of 331 votes. The minority coalition fell after three months, marking the shortest administration of France’s Fifth Republic.
However, the move was expected after Barnier had special powers to force through a Social Security budget on Monday.
The common currency pushed off concerns that France is in turmoil politically and economically.
The rain has also shrugged off data showing that retail sales in the eurozone were weaker than expected. Retail sales fell 0.5% month on month in October after rising 0.5% in September. Economists had forecast a fall of 0.3%. This marks the first fall in sales volumes since June and the steepest rate of decline since December 2023.
The data follows yesterday’s business activity data, which saw the composite PMI fall to a 10-month low. The ECB is widely expected to cut interest rates by 25 basis points next week.
The pound is easing lower as the outlook in the UK deteriorates.
According to the BoE survey published today, over half of UK employees plan to increase prices and cut jobs in response to the new Labour government’s first budget.
According to the Bank of England’s monthly decision-maker panel survey, 60% of companies expect to lower their profit margins in order to cope with the rise in National Insurance contributions. However, 54% also expected to raise prices at the same proportion and said that they would also lower employment.
The Bank of England is closely watching how companies respond to the labour budget to assess its potential impact on inflation and, therefore, its likely future path for interest rates.