Pound falters as UK’s Autumn Budget fails to impress

The pound stumbled on Wednesday, after the UK government’s Autumn Budget received a tepid response from GBP investors.

Sterling appears to have found some stronger footing so far this morning, with GBP/EUR buoyed at €1.1859 and GBP/USD edging up to $1.3756. GBP/CAD has firmed to C$1.7010, while GBP/AUD and GBP/NZD hold steady at AU$1.8291 and NZ$1.9150 respectively.

Looking ahead, will some dovish forward guidance from the European Central Bank (ECB), send the euro lower today?

What’s been happening?

The pound trended broadly lower yesterday, as markets digested the publication of Chancellor Rishi Sunak’s Autumn Budget.

Whilst the Budget included an upbeat assessment of the UK’s finances, with the Office for Budget Responsibility (OBR) forecasting the economy will expand by 6.5% in 2021, the measures announced by Sunak appeared to receive a lukewarm welcome from GBP investors, and failed to reverse an initial downtrend in the pound.

The US dollar also softened on Wednesday, following the publication of the latest US durable goods orders release, which revealed orders contracted 0.4% in September, whilst also revising down August’s order growth from 1.8% to 1.3%.

This dip in the US dollar, alongside a surprise improvement in German consumer confidence helped to propel the euro higher during yesterday’s European trading session.

What’s coming up?

Top of the agenda today, will be the European Central Bank’s latest interest rate decision.

This could see the euro come under pressure as the ECB is widely expected to reaffirm its dovish bias by keeping interest rates on hold and reiterating its view that the recent spike in inflation in the Eurozone is temporary.

Also in the spotlight today will be the publication of the latest USD GDP figures, which are expected to report the pace of growth in the US economy more than halved in the third quarter.

The release could actually bolster the US dollar however, as a slowdown in the world’s largest economy could raise concerns over the trajectory of the global economic recovery and weaken market risk appetite.

Meanwhile, in the absence of any notable GBP data, the direction of the pound may be driven by domestic coronavirus developments, potentially buoying Sterling sentiment if new cases continue to fall.