The pound begins Monday at a two-week low against the euro after weakening by roughly half a cent on Friday. Part of that was a reaction to economic fragility (the UK economy shrank by 0.1% in October), but that wasn’t the full story.
The bigger factor was that the data virtually guaranteed the Bank of England would decide to cut interest rates by a quarter-point (0.25%) at the meeting on Thursday. According to the ever-sagacious markets, the only thing standing in the way of another quarter-point cut is fresh inflation data. Even then, it would have to take something truly shocking to force policymakers into playing the grinch.
Rate cuts tend to have a negative effect on the pound. Ahead of the Bank’s decision, we strongly recommend you lock in today’s rate by calling 020 8003 4915. Your account manager will be able to provide peace of mind with a quick and easy discussion.
Headline numbers rarely tell the full story, but the last four GDP reports won’t make for pretty reading in Westminster. Going back to July, the monthly growth data reads: -0.1%, -0.1%, 0%, and -0.1%. Chancellor Rachel Reeves will hope her Budget helps arrest this slide, with the UK dangerously close to recession territory.
Nationwide’s house price outlook, published this morning, predicted the average sale price on a British home could rise by up to 4% next year as affordability improves. Rightmove also forecast an increase, although their experts pointed to a more modest 2% bump.
It’s a busy old week for economic data before we head into the traditional festive season lull. There’ll be another insight into how the British economy is faring when manufacturing and services data arrive tomorrow. Retail sales for the black Friday period then follow.
For the euro, a low-key last decision of the year from the European Central Bank (ECB) might prove less impactful than the schedule of new economic data. There’s always the chance the ECB might spring a surprise, but German manufacturing and consumer reports are the centre of attention for now.
