- Pound (GBP) is falling for a second day
- Reports of a plot to oust PM Kier Starmer are circulating
- Euro (EUR) rises as German inflation confirms 2.3%
- The ECB are not expected to cut rates again
The Pound-Euro (GBP/EUR) exchange rate is falling for a second straight day. The pair fell 0.39% in the previous session, settling on Tuesday at €1.1355. It traded between €1.1345 and €1.1405. At 13:00 UTC, GBP/EUR trades -0.24% at €1.1328.
The pound is falling for a second straight day on Wednesday after a weaker-than-expected labour market report yesterday and amid reports that Prime Minister Keir Starmer is on alert for an attempted plot to oust him.
According to several UK media outlets, allies of Starmer say the Prime Minister would fight any challenge to his leadership. Health Secretary Wes Streeting has also denied reports that he was plotting to remove the Prime Minister.
This political uncertainty, combined with uncertainty about the pe-budget environment, means investors prefer to sell GBP.
Attention is firmly on the Chancellor’s budget on November 26th, where fiscal tightening is expected. The state of public finances has deteriorated after Labour turned on welfare spending cuts, and it is also dealing with reduced productivity forecasts.
The market is still pricing in around a 75% chance of a Bank of England rate cut next month, following labour market data that showed unemployment rose to 5%, its highest level since the pandemic.
The euro is rising against the pound but struggles against the US dollar as investors digest the latest inflation figures from Germany.
German CPI data confirmed that inflation decreased slightly to 2.3% year on year in October, down from 2.4% in September. This was in line with the preliminary reading.
The data is not expected to affect the ECB, which is widely believed to have reached the end of its rate-cutting cycle.
The central bank will keep an eye on growth following mixed recent data.
While PMIs last week were better than expected, German investor sentiment figures this week have missed the mark.