Pound undermined by disappointing Autumn Statement

Philip McHugh November 23rd 2023 - 2 minute read

The pound weakened during Wednesday’s session as markets were underwhelmed by UK Chancellor Jeremy Hunt’s Autumn Statement.

Sterling is fluctuating so far this morning, with GBP/EUR rangebound at €1.1482 and GBP/USD strengthening at $1.2524. GBP/CAD is sideways at CA$1.7124, while GBP/AUD is ticking downward at AU$1.9073 and GBP/NZD is similarly weakening at NZ$2.0676.

Looking ahead, will underwhelming PMIs weigh on the pound this morning?

What’s been happening?

On the back of Chancellor Jeremy Hunt’s Autumn Statement, the pound began to fall against its peers yesterday.

Hunt’s budget was promoted as super-charging growth, however it failed to impress GBP investors, particularly in light of the the Office of Budget Responsibility’s (OBR) accompanying forecasts.

The OBR now expects UK GDP to grow by 1.6%, as opposed to its March estimates of 1.8%, which weighed heavily on Sterling.

The US dollar, meanwhile, managed to climb towards the end of yesterday’s session following better-than-expected jobless claims.

Labour data showed robust levels of employment, which prompted USD investors to bet on additional tightening from the Federal Reserve.

Elsewhere, the euro struggled at the beginning of the European session. The European Central Bank (ECB) warned of weak economic growth, but the common currency was able to reverse these losses.

What’s coming up?

Looking ahead, the primary focus for Thursday’s session is the UK’s latest set of PMIs.

The service sector reading is forecast by economists to remain at 49.5, which may weigh on the pound. Signs of continued weakness in the vital sector may stoke fears of a winter recession.

However, this could be offset by signs of improving activity in the manufacturing sector, but any gains may be limited in scope.

Meanwhile, the euro could gather pace if the ECB’s latest monetary policy meeting minutes skew hawkish. As the perception has grown that the ECB may cut rates, suggestions of future tightening may lift EUR.

Furthermore, signs of improvement in the Eurozone private sector could cushion EUR exchange rates.

Meanwhile the US dollar may see limited movement today as US markets are closed for Thanksgiving.

Written by
Philip McHugh

Select a topic: