Daily currency update
The pound has fallen this morning as October’s growth data missed forecasts, showing a contraction of -0.1% compared to the previous month. Markets had expected the economy to expand by 0.1%, but this marks the second consecutive decline of this size, highlighting the economy’s struggle against multiple headwinds.
High interest rates and the fallout from the Labour Budget remain the main domestic challenges, while international pressures include turmoil in the Middle East and the ongoing conflict between Russia and Ukraine. These factors continue to weigh heavily on the UK economy and investor confidence.
In response, GBP/USD fell from around 1.2660 to 1.2630 following the data release. GBP/EUR also dropped to 1.2060, a decline of nearly one cent in 24 hours, when many thought it could reach levels not seen since the aftermath of the Brexit referendum.
Key movers
The European Central Bank (ECB) cut interest rates as expected yesterday, reducing borrowing costs by 25 basis points. This marks the third consecutive rate cut by the ECB. The language in the bank’s accompanying statement was adjusted, signaling that further cuts are likely at each meeting until ECB Chief Christine Lagarde and other policymakers are confident that rates are sufficiently low to stimulate growth, which has now become their primary concern.
EUR/USD slipped slightly following the decision, largely due to downward revisions in growth estimates rather than the rate cut itself. With little significant economic data on the horizon, geopolitical developments and any updates from Donald Trump’s incoming administration are expected to be the key drivers for markets in the near term.
Expected ranges
GBP/USD: 1.2560 – 1.2700 ↓
GBP/EUR: 1.2000 – 1.2115 ↓
EUR/USD: 1.0400 – 1.0530 ↓
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