- Pound (GBP) is rising after losses yesterday
- BRC consumer confidence posted the sharpest decline since April
- Euro (EUR) is falling after construction output falls
- Losses could be limited, given the ECB is at or near the end of its rate-cutting cycle
The Pound-Euro (GBP/EUR) exchange rate is rising after losses yesterday. The fell rose 0.28% in the previous session, settling on Wednesday at €1.1319. It traded between €1.1312 and €1.1363. At 15:00 UTC, GBP/EUR trades 0.3% at €1.1353.
The pound is rising amid an upbeat market mood, despite signs that UK consumer sentiment is falling ahead of the budget.
According to data from the British Retail Consortium, optimism surrounding the economy and consumers’ personal finances recorded the sharpest decline this month since April. Casting the mind back, April was when worries about U.S. President Trump’s wide-ranging tariffs hit sentiment.
According to the BRC, confidence has been hit by government hints of a possible increase in income tax in the upcoming budget, although this idea now appears to have been ditched.
The budget is scheduled for November 26th, with the outlook for bonds, stocks, and sterling all depending on finance minister Rachel Reeves achieving the right balance between fiscal restraint and support for growth.
Bank of England rate cut expectations ramped up yesterday after UK data showed that CPI cooled for the first time in five months, easing to 3.6% down from 3.8%. The market is 80% convinced the BoE will cut rates next month, which could limit sterling’s upside.
The euro is trading under pressure after eurozone construction output contracted by 0.3% month on month in September, following upwardly revised 1% growth in August, marking the deepest contraction since March.
On a monthly basis, construction output declined 0.5% in September, marking a second straight month of contraction.
Attention will now turn to Eurozone consumer confidence data, which is expected to remain roughly stable at -14, up slightly from -14.2.
While the euro is falling today, it remains broadly supported by expectations that the ECB has ended its rate-cutting cycle, as inflation hovers around the 2% target.
