The Pound-Euro could remain sensitive to ECB guidance, while softer UK growth forecasts may limit Sterling’s ability to retest recent highs.
The Pound Euro (GBP/EUR) exchange rate slipped from a 17-month high on Wednesday as the UK Autumn Budget was announced.
At the time of writing, GBP/EUR was trading at €1.1937, down from an overnight high of €1.1957.
Pound to Euro (GBP/EUR): 1.194564 (-0.09%)
Euro to Dollar (EUR/USD): 1.113247 (+0.04%)
DAILY RECAP:
The Pound (GBP) initially fell on Wednesday as GBP investors remained cautious ahead of the Autumn Budget.
Sterling then struggled to recoup these losses in the wake of the Budget announcement, despite markets responding relatively positively to the Chancellor’s fiscal measures.
While UK borrowing costs dipped as the Chancellor unveiled his plans, GBP lacked support due to worries about fading momentum in the UK economy.
In its accompanying forecast, the Office for Budget Responsibility (OBR) downgraded its UK GDP outlook for 2027 from 1.6% to just 1%. This dreary outlook for next year’s economic performance put some pressure on the Pound.
Meanwhile, the Euro (EUR) struggled to push its advantage against the Pound, although it crawled up from the fresh 17-month low struck overnight.
Stable French government bond yields helped to soothe EUR investors, although markets remain anxious about the fiscal crisis facing the Eurozone’s second-largest economy.
Meanwhile, some downbeat German data also limited the single currency’s potential, although it wasn’t enough to pressure the Euro. Germany’s latest consumer confidence index dropped to -30.8 heading into November from -30.6 in October, striking its worst level since May.
However, this modest deterioration failed to push EUR lower.
Near-Term GBP/EUR Forecast: ECB Decision in the Spotlight
Looking forward, the focus on Thursday will be the European Central Bank’s (ECB) interest rate decision.
The ECB is expected to leave rates unchanged, but could signal that further tightening remains on the table. A hawkish pause may offer EUR limited support, although a more cautious tone could undermine the euro. Investors will also be listening for any comments about the debt crisis in France.
Meanwhile, the Pound may start to settle in the wake of the UK Budget. With fresh British data thin on the ground, Sterling could face muted movement.
Our currency coverage draws on live market data, official economic releases and published bank research.
