Last week, GBP hit a new six-month low against the EUR, and technical indicators on the charts suggest a potential further decline in the coming days unless UK PMI numbers surpass those of the Eurozone. Prior to Thursday's data release, the UK Autumn Statement is anticipated, and if the government takes decisive actions to boost business investment and productivity despite limited fiscal space, it could provide some support to GBP.
Nevertheless, GBP is facing pressure compared to its continental counterpart, raising doubts about whether this week's events can halt its decline. Last week, GBP/EUR touched a fresh six-month low, almost breaking €1.14, largely due to a below-consensus inflation print that increased expectations for interest rate cuts in 2024.
The upcoming Autumn Statement on Wednesday is expected to outline updated tax and spending plans, influencing the GBP's value significantly. The current government's emphasis on sustainable finance, led by Sunak and Hunt, reduces the likelihood of a major Pound decline following this year's Autumn Statement.
Despite fiscal constraints limiting the potential for tax cuts and spending increases, signs suggest a focus on supporting businesses ahead of a consumer-oriented budget statement in spring 2024. GBP's performance may hinge on whether the government convinces markets it has effectively boosted UK productivity.
Thursday's release of the October PMI survey at 09:30 GMT is crucial, with GBP exchange rates expected to respond to any surprises. Forecasts for the S&P Global/CIPS manufacturing PMI in November are 45.0, services at 49.5, and the composite PMI at 48.8. Positive deviations in the data could benefit GBP, particularly considering the prevailing negative sentiment towards the UK economy.
GBP’s performance at the end of the week may depend on how the Eurozone PMIs for November compare, released just before the UK's. Eurozone manufacturing PMI is forecast at 43.5, services at 48, and the composite reading at 46.7. If the Eurozone PMIs outshine the UK's, Pound-Euro could test lower levels in the 1.13s.
