- Pound (GBP) rose on optimism surrounding the new PM
- Economic outlook still dire
- Euro (EUR) slips as German business sentiment remains weak
- European energy stores are full ahead of winter
The Pound Euro (GBP/EUR) exchange rate is holding steady after strong gains in the previous session. The pair rose 0.75% yesterday, settling at €1.1502 after trading in a range between €1.1418 – €1.1543 across the session. At 05:45 UTC, GBP/EUR trades 0.0% at €1.1502.
The pound surged in the previous session, looking past the economic gloom and cheering Rishi Sunak becoming the new Prime Minister. The pound hit its highest level since mid-September against the USD and a weekly high against the euro.
The former Chancellor said that he would fix the mess that he inherited and restore trust and credibility whilst tackling the deep economic crisis. The fact that the pound has rallied and the gilts market has recovered suggests that the market sees him as a steady hip after weeks of chaos.
Jeremy Hunt will remain as Chancellor and will go ahead and present the rest of the budget on October 31st.
There are doubts over how long the pound can hold onto these gains given the double-digit inflation, slowing growth and a huge current account.
Today there is no high impacting UK economic data. Instead, attention is likely to remain on Downing Street and developments there.
The euro fell yesterday after German IFO business sentiment data remained weak and raised concerns that the country is sliding into recession
October IFO business climate index fell from 84.4 to 84.3. This was in fact ahead of forecasts as analysts had expected a slide to 83.3. Even so it was still the worse level since May 2020.
The data highlights the problems that surging inflation and soaring energy prices are having.
Germany, the largest economy in the eurozone is expected to contract by 0.4%in the final quarter of the year, tipping the country into a recession after a 0.2% contraction in Q3.
Today there is little data to focus on. investors will instead be keeping an eye on gas prices which have fallen sharply from the summer peak. An early filling of storage has helped calm fears before temperature are ramped up for winter