Pound sterling climbs versus its major counterparts following the UK budget announcement.
The Pound Sterling (GBP) outperformed the bulk of its peers on Thursday as traders reduced their expectations that the Bank of England (BoE) would aggressively cut interest rates following the release of the United Kingdom’s (UK) Labour government’s inaugural Autumn Forecast Statement on Wednesday.
Moreover UK Chancellor of the Exchequer Rachel Reeves’ budget announcement included the largest tax rise in over three decades to fix the hole in public services, which she referred to as “inheritance from conservatives”.
Traders reduce their bets on a BoE interest rate drop as inflation projections are revised upward.
The main focus of the UK budget was the collection of 40 billion pounds in taxes through an increase in employers’ contributions to National Insurance (NI), greater duty on alcohol and tobacco, and a steep increase in Capital Gains Tax. Reeves increased investment in several sectors, including the National Health Service (NHS), affordable housing, funding a fuel charge freeze, and establishing green hydrogen initiatives.
Meanwhile, the UK’s Office for Business Responsibility (OCR) updated inflation predictions for 2024 upward to 2.5% from 2.2% in March, prompting traders to expect the BoE to cut interest rates less. The agency also upped its inflation estimates for 2025 much higher, to 2.6% from 1.5% earlier. anticipated.
Investors in the United States predict the NFP data to reflect decreased labor demand in October.
Investors will now focus on the Bank of England’s monetary policy meeting, which will be announce on November 7. According to a Reuters poll conducted between October 22 and 28, the BoE is projected to decrease interest rates by 25 basis points (bps), or 4.75%.
Daily Market movers: Pound Sterling gains modestly against the US dollar.
In Thursday’s London session, the pound sterling edged higher, approaching 1.3000 against the US dollar (USD). The GBPUSD pair rises as the US Dollar falls ahead of a flood of economic data due on Thursday and Friday. The US Dollar Index (DXY), which tracks the Greenback’s value versus six major currencies, is approaching 104.00.
Moreover The US dollar falls somewhat due to lower-than-expected US GDP growth. in the third quarter countered a fairly positive ADP Employment report for October. According to ADP figures, private payrolls increased sharply to 233K from 159K in September.
Investors will closely watch the US Nonfarm Payrolls (NFP) statistics for October.
Investors will closely watch the US Nonfarm Payrolls (NFP) statistics for October, which will be release on Friday, for fresh clues about the present state of the labor market. The NFP data projected to indicate that the economy added 115K jobs, fewer than the 254K jobs generated in September. The unemployment rate predicted to continue at 4.1%.
Furthermore Signs of slowing employment growth would prompt the Federal Reserve (Fed) to be more dovish, whilst strong numbers would weaken them. According to the CME FedWatch tool, the central bank predicted to lower interest rates by 25%.Basis points (bps) will be discuss at both the November and December policy sessions.
Investors will focus on the US Personal Consumption Expenditure Price Index (PCE) data for September, which will be release at 12:30 GMT. The core PCE inflation rate, which the Fed’s preferred inflation indicator, expected to have increase by 2.6%, down from 2.7% in August.
