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Forex News: Pound Falls As U.K. Govt. Cuts Growth Forecasts

Pound Falls As U.K. Govt. Cuts Growth Forecasts

11/22/2017 - 09:59:00 (RTTNews)

(RTTNews) - The pound weakened against its major counterparts in the European session on Wednesday, as the U.K. government slashed its economic growth forecast for this year as well as coming years through 2022.

In its autumn budget, the Office for Budget Responsibility downgraded U.K. GDP growth forecast to 1.5 percent in 2017, from its earlier estimate of 2 percent.

The OBR also trimmed growth forecasts to 1.4 percent in 2018 and 1.3 percent for both 2019 and 2020, from its previous projections of 1.6 percent, 1.7 percent and 1.9 percent, respectively.

The U.K. budget watchdog also cut the outlook for productivity growth and expects it to remain flat in 2017, before increasing 0.9 percent in 2018 and 1.0 percent in 2019. This may be compared to the Spring Budget forecast of 1.7 percent on average over the forecast period.

"The negotiations on our future relationship with the EU are in a critical phase," Finance Minister Philip Hammond said. "We have already invested almost £700 million in Brexit preparations. And today I am setting aside over the next two years another £3 billion."

The currency showed mixed performance in the Asian session. While it rose against the franc and the greenback, it held steady against the euro. Against the yen, it dropped.

The pound dropped to 1.3214 against the greenback, down by 0.4 percent from a high of 1.3262 hit at 1:15 am ET. If the pound weakens further, 1.31 is possibly seen as its next support level.

Data from the Labor Department showed a pullback in initial jobless claims in the week ended November 18.

The report said initial jobless claims fell to 239,000, a decrease of 13,000 from the previous week's revised level of 252,000.

The pound that closed Tuesday's trading at 148.82 against the Japanese currency weakened to a 2-day low of 148.09. Next key support for the pound-yen pair is seen around the 147.00 region.

The U.K. currency dipped to a 2-day low of 1.3063 against the Swiss franc, compared to 1.3124 hit late New York Tuesday. The pound is seen finding support around the 1.29 area.

The pound dropped back to 0.8885 against the euro, edging closer to pierce its early 2-day low of 0.8887. Further downtrend of the pound is likely to take it to a support around the 0.90 level.

Looking ahead, University of Michigan's final consumer sentiment index and Eurozone preliminary consumer sentiment index for November are due shortly.

At 2:00 pm ET, the Federal Reserve's minutes from the October 31-November 1 policy meeting are due.

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