- Pound (GBP) tumbles for a second straight day
- UK gilt yields rise to multi-year highs
- Euro (EUR) is rising vs. GBP but falls vs. USD
- Eurozone retail sales rise just 0.1% MoM
The Pound Euro (GBP/EUR) exchange rate is falling for a second straight day. The pair fell 0.69% in the previous session, settling on Wednesday at €1.1979. It traded in a range between €1.1972 and €1.2074. At 12:00 UTC, GBP/EUR trades -0.42% at €1.1929.
The pound is tumbling lower for a second straight day as UK gilt yields continue to rise. The UK 30-year gilt yield is at its highest level in 26 years, and the 10-year yield is at levels last seen in 2008.
The setoff in both the pound and gilts points to capital flight as investors fret over the fiscal and inflationary outlook in the UK. The market is losing confidence in the government’s ability to manage public finances.
The UK continues to struggle with slower growth in a deteriorating labour market as employers grapple with tax rises following the Labour budget unveiled on October 30th.
While similarities can be drawn to September 2022 when Prime Minister Liz Truss unveiled budget plans for moves in the market, this time, I’m nowhere near as acute. However, that doesn’t mean the government can sit back and relax. Chancellor Rachel Reeves has made a statement saying that the government maintains an iron grip on public finances, although this has done little to restore confidence.
The euro is rising against the weaker pound but continues its descent against the US dollar as the market weighs up weaker-than-expected retail sales from the eurozone.
Eurozone sales rose just 0.1% month on month in November rising after 0.3% decline in October. However this was still below the 0.4% increase that was expected.
The data shows that consumer confidence has fallen to its lowest level since spring, which is a sign of jitters among households despite accelerating wages.
The data supports the view the ECB will cut interest rates again this month by 25 basis points.
