The exchange rate rose to 1.1453 euros today, boosted by hawkish comments from Bank of England (BoE) officials during a UK Treasury committee session. Governor Andrew Bailey and Lieutenant Governor Dave Ramsden discussed measures to combat persistent service inflation, with the goal of reaching a strict 2% goal. The pound’s strength was further supported by UK public borrowing, which came in £16.9bn below Office for Budget Responsibility (OBR) forecasts, suggesting potential tax cuts by from Chancellor Jeremy Hunt to stimulate economic growth.
By contrast, the euro weakened as traders shifted toward riskier assets and began pricing in expected interest rate cuts by the European Central Bank (ECB) by mid-2024 amid signs of cooling. inflation and a slowdown in the eurozone economy. The fall of the euro also reflects its negative correlation with the poor performance of the US dollar.
Adding to the euro’s woes, it saw a significant drop just above the 0.8700 level against the pound following fresh hawkish views from Bank of England members on possible interest rate hikes in response to high expectations. of inflation. The Bank of England’s Jonathan Haskel indicated that current Consumer Price Index (CPI) data may not accurately capture actual inflation trends.
Looking ahead, market participants anticipate a slight improvement in the November EU Consumer Confidence Index from -17.9 to -17.6, with attention focused on upcoming announcements from the Consumer Managers’ Index. purchases (PMI). Forecasts suggest a modest rise in the EU High Frequency Output Composite PMI (HCOB Composite PMI) to almost 46.9, while expectations for the UK S&P Global/CIPS Composite PMI remain unchanged at around of 48.7, except for unexpected data from the manufacturing sector.
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