Currency Note

Markets await autumn Budget

By Erin Harding October 27th, 2021

Editorial credit: Ilyas Tayfun Salci / Shutterstock.com

After reaching a 19-month high against the euro yesterday, the pound is still strong this morning ahead of the Chancellor’s autumn Budget.

At around 12:30 this afternoon, Rishi Sunak will reveal his spending plans. The pound could be impacted by this, especially if any announcements have a bearing on decisions from the Bank of England.

The euro is weaker this morning ahead of the European Central Bank’s monetary policy meeting, which is due to take place tomorrow. President Christine Lagarde is expected to confirm that interest rates will be hiked in 2024.

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GBP: Pound could react to autumn Budget

The pound is still strong against the euro and the dollar this morning ahead of the autumn Budget, which is due to take place later today. Sterling hit a 20-month high against the euro yesterday – the strongest it had been since the start of the pandemic.

At around 12:30pm, Chancellor Rishi Sunak will reveal his spending plans and changes to tax. A pay rise for public sector workers has already been announced, as well as an increase in the National Living Wage.

A budget which includes a hike in wages and measures to support the UK economy post-pandemic could influence actions from the Bank of England, due to concerns over rising inflation.

GBP/USD chart over past year

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EUR: ECB meeting tomorrow

The euro is weaker against the pound and the dollar this morning ahead of the European Central Bank’s monetary policy meeting tomorrow.

The markets are expecting ‘more of the same’ during the meeting tomorrow. The ECB has, so far, stuck to a more ‘dovish’ approach to monetary policy. President of the ECB, Christine Lagarde, is expected to confirm that an interest rate hike will take place in 2024 and stick to the view that higher inflation is transitory.

This approach differs to that of the Bank of England and Federal Reserve, which are expected to hike interest rates in the very near future.

USD: Dollar softer ahead of data

The dollar is weaker against the pound but stronger against the euro this morning ahead of economic data releases today.

Figures for durable goods orders will be released today, expected to fall to -1.1% in September. This follows a surge in August, which was driven by orders for aircraft parts.

Tomorrow, GDP figures will be released for the US, as well as jobless claims figures.

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