The British Pound (GBP) has recently faced significant downward pressure due to disappointing GDP data and growing fiscal concerns. The UK's economy grew only 0.1% in the third quarter, below expectations, which has increased speculation that the Bank of England (BoE) may opt to cut interest rates in December. This prospect is further compounded by the upcoming Autumn budget scheduled for November 26, raising fears of potential tax hikes and additional economic instability.
In the wake of these developments, GBP has fallen to multi-month lows against both the US dollar and the euro. Analysts report GBP/USD trading at 1.3160, which is around 1.7% lower than its three-month average of 1.3393. Similarly, GBP/EUR has slid to 1.1321, approximately 1.4% below its three-month average of 1.1481. This reflects a broader trend of weakening in the British currency, with the current exchange rates featuring limited volatility within stable ranges.
Concerns over the UK's fiscal health have also prompted fears of a £20 billion budget shortfall, as the Office for Budget Responsibility (OBR) is expected to revise productivity forecasts downwards. The markets evidently foresee a bearish outlook for the pound, leading to heightened uncertainty ahead of the BoE's upcoming meeting where interest rates are anticipated to remain unchanged.
Conversely, the GBP/JPY exchange rate is currently trading at 203.4, which is 1.2% higher than its three-month average of 200.9, indicating some resilience against the Japanese yen, although this seems to be an exception in the current context of overall GBP weakness.
As the situation evolves, stakeholders are advised to stay attuned to fiscal policy developments and central bank decisions, as these will play a crucial role in determining the currency's trajectory in the near term.
