UK Inflation came in a little lower than expected, which has pushed the Pound down against other major currencies. Prices rose 3.8% over the past year, slightly below the 4% figure that many were expecting. That may not sound like a big difference, but it’s enough to take some pressure off the Bank of England, which is now likely to cut interest rates again in December, with markets pretty much fully pricing in a 25 basis-point cut. For households and businesses, that’s good news — it means borrowing could get cheaper and everyday costs may ease a little.
Turning our attention to the markets, the Pound fell after the release. The Pound to Euro rate slipped below 1.15, and the Pound to Dollar rate dropped to around 1.3350. That’s because lower inflation usually means lower interest rates, and that tends to make a currency weaker. A further cut in Interest Rates would also bring a much more positive outlook in The UK with rates set to drop below 4% for the first time since March 2023.
Aside from the Bank of England, Rachel Reeves announces her budget on November 26th, with her decisions also set to potentially influence future policy decisions from the central bank. Rachel Reeves is predicted to announce a number of tax increases and spending cuts to claw back the government shortfall of nearly £40 billion. Moving forward, the outlook for Sterling doesn’t look positive with falling interest rates and potential tightening pressure off the back of the budget.
GBP/EUR 1.1473 GBP/USD 1.3313 GBP/AED 4.8910
GBP/AUD 2.0500 GBP/CHF 1.0595 GBP/CAD 1.8650
GBP/NZD 2.3165 EUR/USD 1.1587 GBP/ZAR 23.2650