Since the beginning of 2025, GBP v EUR has fallen 1.5% and GBP v USD is down 2.5%.
Pretty much all of that has been down to the deterioration in UK growth fundamentals. Chancellor Reeves' credibility is in question. So today poses a risk event to Sterling, as Reeves speaks in Parliament and you can bet your bottom Dollar she will be pushed hard by the opposition.
In the lead-up to the elections, Labour promised to deliver economic growth via pro-business policies. But, the party has instead delivered the exact opposite (nothing new there then).
Bonds have subsequently been sold-off, causing a surge in yield, which means it is more expensive for the Government to service its own debt. Tax rises at this point would probably lead to a revolt and so the obvious solution 'should' be spending cuts (which brings its own issues.
What does this mean for the Pound?
Low economic confidence, means a lower currency in simple terms. Consumers won't spend and as a services nation, this is essential for GDP. Overseas investment won't pour in and this is too crucial for growth. All this will weaken Sterling as you have all already seen.
It remains too early to tell what happens next, but the speech today and economic data releases still due this week will give us some idea on what the next few weeks at least may look like.
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