Pound under pressure amid political and fiscal uncertainty
Daily Currency Update
Sterling’s weakness persisted late last week, with political and fiscal uncertainty continuing to pressure the pound. Chancellor Reeves added to bond-market jitters after announcing the reversal of the previously planned income-tax increase, further unsettling investors.With sterling trading near two-year lows against the euro, sentiment weakened further after a soft Q3 GDP print showed the UK economy growing just 0.1%—down from 0.3% in Q2—and contracting 0.1% month-on-month. The data has strengthened expectations of a Bank of England rate cut in December, with growth concerns likely to spill over into 2026 and continued pressure on the pound.
This week brings a heavy slate of UK data. Markets will be watching November PMIs for signals on business sentiment, alongside inflation figures that will set the tone ahead of the November Budget. Several BoE speakers are also on the agenda, with markets currently pricing a 75% chance of a December cut.
Key Movers
Elsewhere, the US dollar remained under pressure despite the government reopening after a record 43-day shutdown, as gaps in key economic data continue to fuel uncertainty. Markets now assign a 40% probability of a Fed rate cut at the December 10 meeting, with attention shifting to the backlog of delayed releases - including the September jobs report due on November 20 and minutes from the Fed’s previous meeting. The shutdown is estimated to have cost the US economy $11 billion in lost output and disrupted pay for 1.4 million federal workers.The euro extended gains for a second week, supported by steady sentiment even as Eurozone data delivered a mixed signal. Industrial production rose just 0.2% in September, well below the 0.7% forecast, highlighting persistent manufacturing weakness. Q3 GDP grew 0.2%, though nearly half the bloc stagnated, with Germany and Italy continuing to underperform.
ECB officials maintained a cautious tone, noting that U.S. tariffs have had limited economic impact and signalling that rates are likely to remain unchanged unless conditions shift materially. With inflation near 2% and the deposit rate sitting at a neutral level, policymakers see little urgency to adjust policy.
Expected Ranges
- GBP/USD: 1.3130 - 1.3190 ▲
- GBP/EUR: 1.1305 - 1.1375 ▲
- GBP/AUD: 2.0110 - 2.0160 ▲
- EUR/USD: 1.1590 - 1.1635 ▼