- Pound (GBP) is rising after yesterday’s losses
- Chancellor Reeves hinted she may hike taxes and cut spending
- Euro (EUR) falls but rises against the USD
- Eurozone industrial production falls -1.2%
The Pound-Euro (GBP/EUR) exchange rate is rising, recouping yesterday’s losses. The pair fell 0.37% in the previous session, settling on Tuesday at €1.1511. It traded between €1.1463 and €1.1541. At 16:00 UTC, GBP/EUR trades 0.25% at €1.1511.
The pound is rising, recovering from yesterday’s losses, after British finance minister Rachel Reeves said she was looking at both tax increases and spending cuts for her upcoming budget on November 26 in order to balance the country’s books.
According to the economic forecasts, Reeves is expected to raise around £30 billion in the budget, after the government’s borrowing costs jumped by more than expected, and a plan to cut welfare costs was dropped.
Elsewhere, data showed that UK grocery inflation continued to rise, reaching 5.2% in the four weeks to October 5th, from 4.9% in September. The data adds pressure to households already facing higher energy bills.
The data from WorldPanel showed that the prices were rising fastest in markets for chocolate and coffee. British retailers say that the higher employer taxes, commodity prices, and regulatory costs are adding to inflationary pressures, which could still continue to climb. The British Retail Consortium predicts that food inflation will be at 6% by the end of the year.
The euro is falling against the pound and rising against the US dollar as euro area industrial production figures came in better than expected but still showed a contraction in August.
Industrial output dropped 1.2% month on month in contrast to the 0.5% increase in July. However, this was less severe than the 1.6% forecast.
The slump was primarily due to the contraction in capital and durable consumer goods production.
Manual right industrial production softened to 1.1% from 2% in July. Overall, the data serves as a warning sign that the economy is not expected to accelerate despite improving business confidence.
And the Q3 manufacturing is unlikely to have positively contributed to GDP growth, keeping Great Expectations muted.
Meanwhile, the final inflation print for France was unchanged at 1.2%.
However, drivers of the euro have shifted from fundamentals to sentiment, with 2 French political concerns that have weighed on the euro in recent weeks.
