GBP EUR Exchange Rate: The Week Ahead October 24th

GBP AUD Sinks After Bank of England Joins Dovish Path

The GBP EUR exchange rate was trading at new yearly highs this week above the 1.1860 level as traders continued to price in a rate hike this year. A cooler inflation report on Wednesday took some of the heat from the latest rate chatter, but traders know inflation will resurface after the energy issues.  The week ahead will see Germany dominate the economic data front, but we also have the Autumn budget from UK Chancellor Rishi Sunak.

The GBP to EUR rate was heading for the weekend around the 1.1860 level with the next target being 1.2000.

Bank of England will move, but maybe not this year

The inflation rate in the UK dipped on Wednesday to 3.1% with analysts expecting 3.2%. That may have cooled expectations for the bank to move this year on rates. Investment banks JP Morgan and Goldman Sachs had both looked towards November as the lift-off but that was ahead of the inflation rate release. The bank’s statements saw a market repricing and that may be enough for policymakers at the moment.

The chief of Scottish Power has warned that energy bills could still rise over the next eighteen months and that will pressure households and businesses. However, German analysts have also warned of a “veritable economic crisis” for the country if politicians don’t act on energy.

The outlook for Europe will still depend a lot on the winter weather, but Europe’s largest economies have more fuel stocks than the UK.

The pound has been strong on rate hike talk but there are fears that the move could be derailed once more by the rising coronavirus cases and potential government restrictions.

The German economy will see consumer confidence, inflation and employment figures released this week.

What to expect from the UK Autumn budget

Rishi Sunak was given a pre-Budget boost on Thursday as figures showed borrowing at a “whopping” £43.5 billion less than expected.

Public sector net borrowing was £21.8 billion in September, compared with forecasts of £22.6 billion and the OBR’s prediction of £25.9 billion back in March. The figures could give the chancellor some wiggle room ahead of Wednesday’s announcement.


The Chancellor’s Budget and Spending Review will set out the government’s financial strategy for the next year. Rumours have been circulating about what will be in the budget, but the recent Conservative press conference gave some hints.

There has been talk of another rise in the minimum wage, while there has also been speculation that the inheritance tax could be cut or dropped entirely. The chancellor will likely make some moves to address the recent squeeze on suppliers and households from energy, while there will be expected moves regarding climate change spending ahead of the COP26 climate summit.

The key issue for Sunak’s budget will also be linked to inflation as pay freezes in the public sector and other such measures will have to account for soaring inflation and consumer prices. Some action to support job creation is also likely after the end of the furlough and record vacancies.

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