Pound sags as European Commission cuts UK growth forecasts

A weakening outlook for the UK economy, the latest Cabinet resignation, and poor housing market data all weighed on the pound yesterday.

Demand for Sterling remains cool this morning. GBP/EUR is soft around €1.1277, GBP/USD has slipped to US$1.3126. GBP/AUD is stuck at A$1.7097, GBP/NZD is flat at NZ$1.8926, and GBP/CAD has weakened to C$1.6644.

There’s a lot on the economic calendar to keep Sterling busy today. Read on to find out what…

What’s been happening?

It was a gloomy day for GBP/EUR yesterday, although GBP/USD was able to hold opening levels.

Markets were still concerned about the potential for a Cabinet reshuffle following the resignation of Secretary for International Development Priti Patel. The latest scandal in government threatens to weaken Theresa May’s grip on the prime ministership even further, threatening a coup or even another general election in the near-term.

On top of this the latest housing market data was sending out bad signals and the European Commission cut economic growth forecasts for the UK over the coming two years.

The Commission was more upbeat about the Eurozone however, forecasting that the currency bloc will record the fastest rate of growth in a decade.

This, combined with strong German trade figures, helped support the euro higher.

Meanwhile, markets were questioning whether they have been too optimistic with regards to how soon President Donald Trump will be able to implement corporate tax reforms.

The US dollar remained soft throughout the day, allowing the weakened pound to cling on to opening levels

What's coming up?

There’s plenty of data on the UK economic calendar today to cause volatility for the pound.

Industrial, manufacturing, and construction output figures and trade balance data for September will be released this morning. An estimate for GDP during the three months to October will be released by the National Institute for Economic and Social Research (NIESR) early this afternoon.

On top of this, Brexit talks have resumed, so any hints or rumours as to how they are progressing - or not, as the case may be - are likely to cause notable turbulence for GBP exchange rates.

The Eurozone releases little of interest, meaning the euro could be left passenger in today’s exchange rate movements.

The presence of high-impact US data may not cause too much in the way fluctuations for GBP/USD. The University of Michigan sentiment index is expected to creep higher but, with odds of a 0.25% interest rate hike next month at over 90%, there is little the data could do to improve the US dollar outlook.

We’re here to talk currency whenever you need us, so get in touch if you want to know more about the latest news or how it could impact your currency transfers.

Reaz Rahman
Senior Dealer

Reaz, our Senior Currency Dealer, joined us in January 2015. Reaz draws on his detailed knowledge of the foreign exchange markets to help customers to choose the right service and time to transfer.