GBP

Sterling ended the week on the backfoot against the US dollar but rebounded against the euro as a shift in general risk sentiment and market reaction to the Autumn Budget contributed to Sterling volatility.

Despite a mixed reaction to the government’s budget, the pound was seen lower against its peers on Friday morning as the market digested the Autumn Statement. The budget outlined £24bn worth of tax increases and spending cuts worth £30bn. Investors expect the increase in tax and spending cuts to have a negative impact on UK economic growth, which is likely the reason why the currency depreciated.

The lack of significant volatility suggests the statement was generally priced in by markets ahead of the meeting after the bulk of the announcement was briefed to the media prior to its release.

The Office for Budget Responsibility released its latest economic forecasts which showed the UK would enter a recession lasting one year whilst forecasting unemployment to peak at 4.9% in Q4 of 2024, up from 3.5% currently.

Sterling was then aided as Retail Sales grew more than expected in October. Retail Sales data showed a jump by 0.6% in October, up from a 1.5 contraction last month beating expectations of 0% growth. The year-on-year figure was also better than expected as data showed a 6.1% contraction against expectations of 6.8%.

Despite these positive releases, the Office for National Statistics warned the volume of sales remain lower than pre-covid levels. The ONS added, the quantity of goods sold was 0.6% lower than October 2020 despite consumers spending 14.2% more.

Key announcements

09:00 – GBP – Bank of England Cunliffe’s speach