- Pound (GBP) is unchanged after modest gains yesterday
- The Chancellor is expected to announce a tax-heavy budget
- Euro (EUR) is unchanged amid a quiet economic calendar
- Russia-Ukraine peace hopes support the euro
The Pound-Euro (GBP/EUR) exchange rate is unchanged on Wednesday after modest gains yesterday. The pair rose 0.04% in the previous session, settling on Tuesday at €1.1379. It traded between €1.1363 and €1.1410. At 12:00 UTC, GBP/EUR trades 0% at €1.1379.
The pound is unchanged in a cautious market mood ahead of the Chancellor’s budget at 12:30 GMT. The Chancellor, Rachel Reeves, will need to announce measures that will both appease MPs and the gilt market.
Rachel Reeves is expected to announce a tax-heavy budget to raise tens of billions of pounds in new revenue to plug a £30 billion funding gap and buffer.
If the bond market doesn’t consider her fiscal plan to be credible, it could send gilt yields surging.
Comments by Reeves ahead of the budget indicate she hopes it will put downward pressure on inflation, making it easier for the Bank of England to cut interest rates.
The market is currently pricing in an 80% probability of a rate cut by the Bank of England next month, following a tight 5-4 vote at the November meeting.
The euro is unchanged against the pound and the USD amid a quiet day on the eurozone economic calendar.
US and Ukrainian representatives continue to work on a road map for a peace plan between Ukraine and Russia. President Trump said on Tuesday that the original plan has been fine-tuned with additional input from both sides. Optimism of a potential peace deal between Russia and Ukraine provides some support to the euro.
Looking ahead, ECB President Christine Lagarde and Chief Economist Philip Lane are expected to speak later today.
The European Central Bank’s financial stability review warned of elevated risks to financial stability in Europe, noting that high public debt in some countries could strain bond markets.
