2023-11-23 11:41:41
Sterling rose to its highest level once morest the dollar since the start of September following British businesses returned to growth in November, fueling hopes that Britain would avoid a recession.
The day following Finance Minister Jeremy Hunt’s Budget presentation, the S&P Global/CIPS UK Composite Purchasing Managers’ Index (PMI) showed a preliminary reading above the threshold of 50 for growth, for first time since July.
The British pound rose 0.5% once morest the dollar to $1.2560. It hit its highest level of $1.2575 since September 6 just following the PMI data.
Against the euro, the pound rose 0.24% to 86.93 pence, following briefly touching a nine-day high once morest the single currency.
“The November PMIs once once more confirm our view that the UK economy is simply in a state of stagnation and not contraction,” said Simon Harvey, head of foreign exchange analysis at Monex Europe. .
“In conjunction with structural supply issues that are expected to keep UK short-term rates higher for longer than in the Eurozone, we expect the UK’s better relative growth outlook to support a further rise of the pound sterling and the euro.
However, the official outlook for the UK economy now projects growth to be significantly lower than previously forecast.
On Wednesday, UK Finance Minister Jeremy Hunt delivered a budget update and said gross domestic product was expected to grow by 0.7% in 2024, compared to the 1.8% expansion forecast in the previous outlook from March from the Office for Budget Responsibility (OBR), Britain’s budget watchdog.
Mr Hunt also announced tax cuts for workers ahead of elections due in 2024 and gave businesses permanent investment incentives to try to speed up an economy that appears stuck in a rut.
The OBR’s forecasts show that the consumer price index is expected to rise by 2.8% next year, up from 0.9% forecast in March.
The Bank of England (BoE) also warned that inflation might be more persistent than expected.
The BoE has held interest rates steady at its last two meetings following 14 consecutive hikes, and Governor Andrew Bailey has suggested interest rates might stay higher for longer than investors think.
Money markets now expect a first BoE rate cut in June, according to LSEG data.
1700744869
#pound #sterling #reaches #highest #level #beginning #September #rise #PMI #November #p.m