- Pound (GBP) recovers from lows after BoE bond purchases
- Will the Chancellor U-turn?
- Euro (EUR) rose despite record low German consumer confidence
- German inflation data due
The Pound Euro (GBP/EUR) exchange rate is falling after holding steady in the previous session. The pair settled +0.0% yesterday at €1.1182 after trading in a range between €1.1026 – €1.1298 across the session. At 05:45 UTC, GBP/EUR trades -0.26% at €1.1153.
The pound experienced volatility in the previous session after the Bank of England decided to step into the bond market to calm the financial markets after the Chancellor’s mini-budget resulted in the pound’s collapse.
The BoE said it was buying long-dated government bonds immediately to try to stabilize the market. The move appeared to calm investors bringing the pound up off session lows and lowering bond yields.
There are growing calls for the Chancellor to perform a U-term with his policy. However, so far, there are no signs that he will despite criticism from the IMF. The BoE has urged the Treasury to release details on how they intend to rein in debt before November, which is when Kwasi Kwarteng said he would do it.
There is no high-impacting UK data due to be released today. Attention will remain on Westminster and any further developments.
The euro rose in the previous session despite German consumer confidence falling to a record low. The GFK consumer confidence index plunged to -42.4 in October, down from -36.5 and well below the -39 that was forecast. This marked the eight straight months of falling confidence and comes amid rising fears over the energy crisis and as inflation sits at a record high.
Limiting any gains in the euro is the escalating energy crisis after Russia was accused of deliberately sabotaging the Nord Stream pipeline and amid reports that Russia could also stop gas flows through Europe.
Today attention turns to German inflation data, which is expected to show that consumer prices jumped to 10% YoY in September, up from 8.8% in August. Hot inflation could boost bets that the ECB will hike rates aggressively.