By Simon Eastman
Tuesday saw the pound crumble across the board, dropping over a percent against the US dollar and reaching 30-month lows against the single currency as the UK productivity forecast is looking likely to be cut more than expected according to Britain’s budget watchdog.
Rachel Reeves has warned the Office for Budget Responsibility could cut the forecast by 0.3 of a percentage point, resulting in a £20 billion hit to the public purse. With the expected cut to the forecast being seen at 0.1-0.2 percent, the additional cut adds further pressure to the Chancellor as she gets ready to deliver the budget, already seen as a potential catastrophe for the pound. With another £20 billion hole to fill on top of what we already have, the glaring question remains as to how she proposes to fill it and the impact the proposals will have on the economy.
Yesterday was shy of any data releases of note but today we have a few across the day. Starting with the UK consumer credit, money supply and mortgage approvals data for September ahead of the Bank of Canada interest rate decision at lunchtime. We also have the policy report and statement released at 1.45pm. US house sales data follows swiftly afterwards at 2pm before the Canadian BoC press conference at 2pm. It then falls to the Federal Reserve to announce their interest rate decision at 6pm alongside their policy statement and the press conference at 6.30pm.
With an interest rate cut expected, we could see some USD weakness, leading to some euro strength as we follow the ever-present currency seesaw. This often leads to the pound suffering against one or both currencies, so anyone with sterling in hand, given yesterday’s weakness, might be prudent to look at securing your upcoming currency requirement today, ahead of the Fed meeting this evening.
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