- Pound (GBP) is rising after losses yesterday
- The Chancellor is expected to hike taxes to fill a £30 billion hole
- Euro (EUR) is falling after German GDP data
- Germany stagnated at 0% in Q3
The Pound-Euro (GBP/EUR) exchange rate is rising after modest losses yesterday. The pair fell 0.03% in the previous week, settling on Monday at €1.1374. It traded between €1.1336 and €1.1387. At 15:00 UTC, GBP/EUR trades 0.15% at €1.1391.
The pound is rising as the markets turn their full focus towards Chancellor Rachel Reeves’ budget tomorrow. She is expected to announce another round of hefty tax increases, testing the confidence of the Labour Party and also the bond market.
There’s been plenty of speculation over the past few months over which taxes may be increased and tomorrow the chancellor will reveal which policy is got the green light as she looks to raise £30 billion to plug a fiscal black hole and create headroom.
Rachel Reeves’ plan will need to be credible to keep the bond market on the side; failure to do so could send borrowing costs soaring. The market will also be watching for measures which could slow growth and inflation, paving the way for another rate cut from the Bank of England next month.
The euro is under pressure after data showed that German growth stalled in the third quarter. Germany’s GDP rose by just 0% in the three months to September. How long is an improvement on the previous quarter when GDP contracted
Weak exports and softer private consumption weighed on growth grow. Germany, which has traditionally been heavily reliant on manufacturing, has found its economy has struggled to gather pace in recent years. Germany has only seen two quarters of growth over the past three years.
The figures come after data released yesterday by the IFO showed that business sentiment deteriorated in November as firms lost optimism about a recovery anytime soon.
The German government is expected to approve the 2026 Budget this week, which could help growth next year.