- Pound (GBP) is falling for a fourth day
- Reeve’s announced £2 trillion spending plans
- Euro (EUR) rises for a fourth day
- France’s economy will grow more slowly than expected
The Pound-Euro (GBP/EUR) exchange rate is falling for a fourth straight day. The pair fell by 0.44% in the previous session, settling on Tuesday at €1.1811. It traded between €1.1806 and €1.1885. At 19:30, GBP/EUR trades -0.15% at €1.1793.
The pound is falling as the market mood sours and as investors weigh up the finance minister Rachel Reeves’ spending review. The chancellor delivered a multi-year spending review highlighting the government’s priorities over the coming years. She announced £2 trillion in public expenditures with annual departmental budget increases of 2.3% in real terms.
Rachel Reeves announced major investments in defence, transport, and energy, prioritising outside of London, to counter the electoral threat from Nigel Farage and reform the UK.
The spending plans confirmed limited fiscal headroom, raising the chances of tax increases later in the year.
Attention will now turn to UK GDP data, which is due to be released tomorrow and is expected to show that growth slowed to negative 0.1% month on month in April.
The euro is rising against the pound and the US dollar despite ongoing concerns about the region’s growth outlook.
France’s economy is expected to slow more sharply this year than previously expected, owing to U.S. trade tensions, which are expected to hit demand for French exports.
After the eurozone’s second-largest economy grew 1.1% last year, it’s forecast to grow just 0.6% this year, according to the Bank of France, which has revised down its estimate from 0.7% forecast just three months earlier.
Most of the hit to growth are expected to come from a general climate of uncertainty surrounding tariffs rather than directly from the trade tariffs themselves.
The central bank added that the calculations were based on assumptions that tariffs would remain at a 10% level.
This monthly business climate survey suggests that the economy would only grow 0.1% in the second quarter, unchanged from Q1.