All eyes are on the budget, and we’ve seen Pound Sterling remain elevated against its major currency peers as the markets are choosing to focus on potential positives to be released later today. Although its been made clear there will be several tax rises across the board, in the form of Inheritance Tax, Stamp Duty, Capital Gains Tax, Fuel Duty and much more, Rachel Reeves has also pledged to invest more in the economy which will allow people to have ‘more pounds in their pockets’ and a greater National Health Service.
The extra spending that Rachel Reeves is alluding to will mainly come from a change in how the government can borrow and repay money, effectively freeing up an extra £50bn of spending. This change has been flagged to provide more relief for the budget deficit, although it should be noted that although this deficit will improve, it’ll still remain fairly large for a number of years to come. Another factor to Sterling remaining elevated is due to a larger budget deficit potentially allowing The Bank of England to avoid having to reduce Interest Rates by as much as other central banks globally.
In the run-up to the budget, GBP has been the best-performing currency of 2024 mainly owing to the cautious approach The Bank of England have took with Interest Rate cuts as a result of better-than-expected economic data of late.
Elsewhere this morning, we have also seen The Euro edge a little higher after seeing stronger GDP data for the third quarter. Germany’s Gross Domestic Product unexpectedly grew by 0.2% when compared with the previous quarter. This actually brought in fresh forecasts for the growth of the economy for the remainder of the year with initial suggestions of stagnated growth now changing to an overall annual growth of 0.2%. This may well provide some breathing space for The European Central Bank, who have so far reduced their interest rates on three occasions this year.
Moving into the afternoon, our focus switches to US Jobs Data with their monthly ADP Employment figures set to be released. The ADP Employment report is a crucial economic indicator which provides an overall view of private sector job growth in The States. The ADP release comes two days before the eagerly anticipated Non-Farm Payrolls and always throws up some surprises. This particular release however will be watched even more closely, due to the fact this release is 4 days before we learn the outcome from The US Election. In some quarters, analysts believe this could also play some part in deciding how residents in The US place their vote. Either way, over the next few days we expect to see volatility for The US Dollar depending on how Jobs Growth looks and the implications of the election.
GBP/EUR 1.1981 GBP/USD 1.2989 GBP/AED 4.7720
GBP/AUD 1.9751 GBP/CHF 1.1259 GBP/CAD 1.8078
GBP/NZD 2.1692 EUR/USD 1.0830 GBP/ZAR 22.8388