European Central Bank cut their interest rates yesterday by 25 basis points – leading up to their meeting there was a split view whether it could potentially be even 50 basis points of the base rate. The stuck to their previous monetary actions of 25. Europe currently facing problems with economic growth – one of the main drivers is that businesses is holding of investments. We have been discussing trade tensions and European companies wants more clarity to how the future will look on potential tariffs. ECB mentioned that recent development of a down-ward spiral of the EUR against major trade partners like UK and US, shows signs of a recovery for exports – that could over time give support for the European economy.
This morning, we have seen UK GDP-figures, economic growth, for a second consecutive month contract by -0.1%. Raising concerns for the UK economy – if economies contract over a whole quarter, it’s technically in a recession. The figures being released this morning came as a surprise, as expectations were that the economy would grow in October. We can see that since the election – the new government has big problems of solving the UK economy and find a balance with their new budget. GBP lost ground to both the EUR and USD by around 0.4% in this morning session. Speculations of a potential rate cut in December is now back on the table, which initially was forecasted by Bank of England to happen in February 2025. BoE next interest rate meeting is taking place next Thursday, and this morning figures have definitely put pressure on BoE members to make the right decision with less than a week to come.
Ahead of next week we don’t only have an interest rate meeting from Bank of England but also the Federal Reserve. USD has been a strong performer recently and the Federal Reserve is expected to continue lowering their interest rate level by 25 basis points. This afternoon we will see both US export- and import prices being released. The forecast is that we will see a contraction for both import and export prices compared to its previous month.
GBP/EUR 1.2046 GBP/USD 1.2616 GBP/AED 4.6366
GBP/AUD 1.9826 GBP/CHF 1.1280 GBP/CAD 1.7953
GBP/NZD 2.1904 EUR/USD 1.0462 GBP/ZAR 22.6037