Credit Rating Agency Warns George Osborne May Miss Targets
The Euro’s advance on Pound Sterling has slowed, despite a stream of pessimistic expert opinions on the UK Autumn Statement. Ratings agency Fitch believes that the Chancellor has severely limited his options by using an uptick in public finances to cover the cost of protecting the police budget and scrapping tax credit cuts.
Nevertheless, Pound Sterling is now only -0.2% down against the Euro.
Earlier…
Widening Trade Balance Knocks 1.5% Off UK GDP
Pound Sterling remains down against the major currencies today despite Year-on-Year Gross Domestic Product remaining steady at 2.3%. Quarterly figures show a fall, from 0.7% to 0.5%, while imports jumped 5.5%, widening the deficit in the trade balance to £14.2 billion.
The GBP/EUR exchange rate is currently trending down -0.2%, at around 1.4215.
Earlier…
The GBP/EUR exchange rate was up yesterday as the measures set out in the Autumn Statement turned were not as severe as anticipated. There was still negative news for the UK economy, however, as George Osbourne outlined plans to meet his borrowing targets.
GBP/EUR Exchange Rate Forecast: Embarrassing Cuts to Climate Change Policy Weakens Pound Sterling
Pound Sterling is down against most of the major currencies today now that investors have had time to understand the implications of yesterday’s Autumn Statement. Chancellor George Osbourne revealed some good news, including increased growth forecasts for the next two years, but not all of the news was positive.
One of the biggest fallouts from the budget comes from the announcement that £1 billion which had been ring-fenced for carbon capture and storage (CCS) will no longer be available. CCS is considered a vital and cost effective way of battling climate change.
According to Chief executive of the CCS Association, Luke Warren: ‘This is devastating. Moving the goalposts just at the time when a four-year competition is about to conclude is an appalling way to do business. It is a real blow to confidence for companies investing in CCS. This technology is critical for the UK’s economic, industrial and climate policies.’
The loss of funding could have large implications for UK environmental spending and the economy, with global companies including Shell already announcing that their CCS efforts will now focus on other countries. The cut could have a negative impact on future spending, as CCS was expected to halve the cost of meeting the 2050 emissions targets.
George Osbourne has made further judgement calls which could raise the cost of meeting carbon targets in the future. Without CCS, there is a chance that gas plants will either have to exceed the UK’s carbon emissions targets or shut down before they have managed to pay for themselves. The government scrapped building standards which require new homes to be zero-carbon, meaning the 400,000 homes promised by the Chancellor in yesterday’s statement could have to be retrofitted with energy saving technology – a costly move.
The GBP/EUR exchange rate is currently down -0.1% and trading in the region of 1.4208.
EUR/GBP Exchange Rate Advancing Despite Uncertainty Ahead of Potential Fed Rate Hike
The European Central Bank (ECB) has warned that a significant rate hike by the US Federal Reserve could send waves through emerging markets and see volatility spilling over into the Eurozone. While the US Dollar has strengthened on the back of anticipation regarding a rate hike, the ECB believes rapid rises in the US interest rate could see US stocks drop and the economy sink back into recession, with the knock-on effect of reducing GDP in some Eurozone currencies by up to 4.7% in the next two years.
The International Monetary Fund (IMF) has also issued warnings regarding the state of the US economy, citing a decade-long quadrupling of corporate debt to $18 trillion and weak balance sheets as factors that could leave companies vulnerable to a rise in US interest rates. This could potentially trigger a new credit crunch, the IMF claims.
Despite the pessimistic outlook on the future of the Eurozone economy and the likelihood of additional monetary stimulus by the ECB after Christmas, the Euro is currently 0.2% up against Pound Sterling.
The EUR/GBP exchange rate is currently trending between 0.7016 and 0.7044.
GBP/EUR Exchange Rate Forecast: Volatility on Friday as UK GDP Figures Released
Several important data releases are due out for the UK on Friday, along with German Retail Sales Figures Year-on-Year (YoY). The biggest impact upon the GBP/EUR exchange rate will come from UK GDP, which is predicted to hold steady with a 2.3% growth rate.
The GBP/EUR exchange rate is currently trading between 1.4184 and 1.4128.
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