The Euro finished on a low again this week, largely due to political uncertainty surrounding Europe and the damaging effect it could have on future financial stability. Reaching a low of 1.0517 versus USD on Wednesday it was the weakest level for the Euro for 12 months. It was also the Euro’s weakest level versus GBP for two months. To offer some conviction French and German PMI figures for services and manufacturing sectors were broadly in line with forecasts.
After paying tribute to former chancellor George Osborne’s work towards cutting the country’s budget deficit, Philip Hammond spoke about the government’s “commitment to fiscal discipline.” Crucially however, the pace of budget tightening over the next 3 years will be slowed, which gave the pound a boost against a basket of currencies, namely the Euro. As a result the Pound continued its gains and hit the highest level versus the Euro since September.
There were no surprises in Wednesday’s Autumn Forecast statement, with the UK budget deficit likely to increase by an extra £122 billion by 2019/20. In addition GDP forecasts could reduce for 2017 and 2018 with Brexiteers believing government maybe too negative.