- Pound (GBP) is rising after losses yesterday
- CBI reported a deteriorating outlook since the Budget
- Euro (EUR) is drifting lower amid a quiet calendar
- Trump trade tariff worries remain
The Pound Euro (GBP/EUR) exchange rate is rising after losses yesterday. The pair fell 0.39% in the previous session, settling on Monday at €1.1974 and trading in a range between €1.1954 and €1.2088. At 12:00 UTC, GBP/EUR trades +0.07% at €1.1982.
The pound is pushing higher, supported by hawkish comments from Bank of England policymakers, although gains were limited by a gloomy outlook according to the Confederation of British Industry (CBI).
According to the CBI, British retailers’ optimism deteriorated to a two-year low following Labour’s first budget as they braced for higher employment costs and weaker demand.
Labour Chancellor Rachel Reeves announced a £25 billion increase in employment taxes in her budget, which was unveiled on October 30th, and a 7% rise in the minimum wage. This is likely to particularly hurt retailers with low margins and a high number of staff.
The CBI’s quarterly survey of retailers showed that the assessment of the business climate dropped to -21 in November down from -13 in August. This was the same as in November 2022 at the peak of the inflation shock.
Meanwhile, consumer’s mood has been subdued, although not as bad as it was in November 2022.
The data comes as Bank of England policy makers remain concerned over sticky inflation and support a more gradual pace of rate cuts.
The euro is drifting lower amid a quiet economic calendar and as the market remains cautious over the prospect of trade tariffs in the region imposed by Trump.
The moon is cautious after Trump threatened 25% trade tariffs on Mexico and Canada additional 10% hike on Chinese imported goods in retaliation for immigration and drug trafficking.
While the economic calendar is quiet today, attention turns to inflation data later in the week, which could provide more clues about the ECB’s future path for rate cuts. The ECB is widely expected to cut rates by 25 basis points in December.
