The Euro Pound (EUR/GBP) Exchange Rate Fluctuated as Markets Brace for Jeremy Hunt’s Fiscal Plan
The Euro Pound (EUR/GBP) exchange rate traded narrowly as the market shifts its focus to the highly-anticipated autumn statement.
At time of writing, the EUR/GBP exchange rate is around £0.8730, relatively unchanged from this morning’s opening levels.
Pound (GBP) Subdued ahead of Proposed Tax Hikes and Spending Cuts
The Pound is remaining relatively muted against its peers this morning. Both the market and investors wait in the wings for the autumn statement.
The autumn statement at midday today will be the second large fiscal event in the space of two months. The measures will follow the disastrous mini-budget delivered by the former Chancellor Kwasi Kwarteng. Not including Jeremy Hunt’s first statement, in which he reversed almost all measures set out by Kwarteng. The biggest government U-turn in modern history, Hunt scrapped £45bn worth of tax cuts, and is set to unveil tax rises worth £24bn instead.
In a statement released ahead of the fiscal plan, Hunt said:
‘There is a global energy crisis, a global inflation crisis and a global economic crisis. But the British people are tough, inventive, and resourceful. We have risen to bigger challenges before.
‘We aren’t immune to these global headwinds, but with this plan for stability, growth and public services – we will face into the storm.’
Weighing on the Pound somewhat, are concerns that despite a potential return to fiscal responsibility. Hunt’s measures could exacerbate the UK’s cost-of-living crisis. Hunt is expected to scale back the Energy Price Guarantee, which could see millions of households paying more on their energy bills. Amongst Hunt’s expected spending cuts, the household energy price cap could be raised from £2500 to over £3000.
Euro (EUR) Wavers on Record High Inflation
The Euro (EUR) is experiencing mixed success against its peers today, despite slightly softer-than–expected inflation.
October’s inflation rate in the Eurozone ticked higher to 10.6% as it narrowly softened from an initial estimate of 10.7%. Despite lower than anticipated, headline CPI remains the highest on record. More concerning is that is remains far above the European Central Bank’s (ECB) target rate of 2%. Surging energy prices don’t appear to be relenting, driving inflation higher once again. Core inflation, excluding volatile prices such as food and energy, also climbed higher to 5.0%. Bert Colijn, Senior Eurozone Economist at ING, commented on the soaring inflation level:
‘The low prices on the wholesale market in recent weeks are clearly not yet translating into declining prices for households.
In fact, it’s likely that this will only happen in a few months’ time and even that is a big ‘if’ because it depends on uncertain factors such as energy supply and the weather of course.’
Euro Pound Exchange Rate Forecast: Autumn Statement to Lift Sterling on Fiscal Responsibility?
Looking ahead, the Euro Pound exchange rate could fluctuate further as Jeremy Hunt delivers his autumn statement. The announcement of tax raises and spending cuts could see Sterling rise with fiscal responsibility. However, a worsening living cost squeeze could sour moods, and the Pound could slide.
Meanwhile, the Euro could see further movement with ECB speeches planned tomorrow. President Christine Lagarde is likely to comment on reining in inflation to the central bank’s target level.