- Pound (GBP) falls for a fourth day
- UK GDP will fall from 1.4% this year to 1.2% next year
- Euro (EUR) is rising after hotter CPI
- Inflation rose to 2.2% YoY vs 2.1% expected
The Pound-Euro (GBP/EUR) exchange rate is falling for a fourth straight day. The pair fell -0.30% in the previous session, settling on Monday at €1.1382. It traded between €1.1370 and €1.1425. At 18:00 UTC, GBP/EUR trades -0.14% at €1.1364.
The pound is falling despite an upward revision to the OECD’s growth forecasts. The Paris-based organisation lifted its 2026 forecast for UK growth to 1.2% up from 1% in its previous forecast in September. It projects growth of 1.3% for 2027.
However, this 1.2% figure is still down from this year’s expected growth of 1.4%. The forecast of slower growth, despite being better than previously expected, comes less than a week after the budget, which announced £26 billion in tax increases over the next five years, including a freeze on income tax thresholds.
The UK will be the second fastest-growing economy in the G7 this year, behind the US; however, it will be overtaken by Canada in 2026.
The euro is rising after hotter-than-expected eurozone inflation. Inflation as measured by the consumer price index unexpectedly rose to 2.2% in November up from 2.1% in October and defying expectations of remaining unchanged. Service sector inflation, a gauge closely watched by the ECB, rose for the third consecutive month to 3.5% in November, its highest level since April.
Separately, data released on Tuesday showed that the eurozone’s unemployment rate unexpectedly rose to 6.4% in October, above the 6.3% forecast.
The ECB will meet for the last time this year on December 18th and is widely expected to leave rates unchanged at 2%.
The market says there’s just a 30% chance of a 25-basis-point rate cut by June next year.
For the OECD, eurozone growth is now forecast at 1.3%, up 0.1% from September’s forecast.
