Pound extends rally despite delay to Autumn statement

The pound pushed higher again on Wednesday, with GBP investors seemingly unfazed by a delay to the UK government’s tax and spending plan.

Meanwhile, Sterling is giving ground so far this morning, with GBP/EUR subdued at €1.1522 and GBP/USD retreating to $1.1592. GBP/CAD has ticked down to C$1.5729, while GBP/AUD and GBP/NZD slide to AU$1.7859 and NZ$1.9827, respectively.

Looking ahead, could a hawkish interest rate hike from the European Central Bank (ECB) help to propel the euro higher today?

What’s been happening?

The pound maintained a positive trajectory yesterday. Optimism over Rishi Sunak’s premiership helped to underpin Sterling sentiment during the European session.

GBP investors also appeared to largely shrug off the delay to the government’s Autumn statement, despite the consequences this may have on the Bank of England’s (BoE) upcoming interest rate decision.

The US dollar, meanwhile, extended its decline through Wednesday’s trading session. The ‘greenback’ continued to be pressured by USD investors scaling back their expectations for future Federal Reserve interest rate hikes.

The slump in the US dollar underpinned the euro through yesterday’s session, thanks to the pairing’s negative correlation. With the EUR/USD exchange rate climbing back above parity for the first time in five weeks.

However, capping these gains was a sense of caution ahead of the European Central Bank’s impending interest rate decision.

What’s coming up?

Turning to today’s session, it seems safe to assume the ECB’s interest rate decision will be centre stage.

Another 75bps rate hike has been largely priced in, leaving the focus on the bank’s forward guidance. If the ECB signals it will maintain its current pace of monetary tightening the euro could push even higher.

Also in the spotlight today will be the publication of the latest US GDP release. The preliminary figures for the third quarter are expected to report the US economy returned to growth, potentially boosting the US dollar in the process.

However, USD investors will be wary of another shock contraction as we saw in both Q1 and Q2.

Finally, the pound could face some headwinds this morning following the Confederation of British Industry’s (CBI) latest distributive trades index. October’s release is expected to report another sizable slump in UK retail sales volumes.