Chancellor Rishi Sunak delivered the budget that many expected with furlough being extended, the deadline for stamp duty decreases pushed back and business tax rates increasing over time. Sunak believes he has done everything he can to deliver on a budget that can massively help the UK open up in the coming months, whilst providing an indication as he plans to plug the gap following all the increased borrowing this year.
The budget has been well received by most, however many have bene clear to point out that there will be a few cliff edge moments in the coming years where changes will take place. The furlough scheme extension till the end of September sees protection across the economy until after the country opens. Many have argued that if you are not back in your role by the end of July then there is a strong chance Sunak’s furlough scheme is only pushing the inevitable down the road.
The GBP/EUR rate continues to hover around the 1.151-1.159 range as has been the case for March so far. There is definitely a sense of the markets waiting in anticipation for the next few weeks to see how economies may open up in the near future and what changes may start to be implemented in the near future.
The UK and EU appear to be walking into another Brexit battle as the UK unilaterally extends the grace period for Irish border checks. The EU had hoped by this point that there would be a process in place to check what crosses between Ireland and Northern Ireland. The EU has essentially declared the unilateral coice breaches international law, however it is considered that this will be resolved in the coming weeks.
The UK Government are likely to be as keen as the EU to put the checks in place and the delay to this favours the UK considerably more as it pushes back any disruption that might be caused. There will be the introduction of certification requirements in the near future which will be alongside a digital assistance scheme to make sure companies don’t fall foul of any changes.
Talks of EU passports for British travellers appears to be gathering momentum in the EU with multiple countries supporting the idea. There is a clear concern as to how fast the EU will manage to vaccinate their population and a vaccine passport might be a viable option to open up the country to tourists. The UK especially look set to have most the population vaccinated by June/July and this could be just intime to enjoy a summer on the European South coast something the Mediterranean tourist economies desperately need to give them a major boost following a difficult 12 months for tourism.
Joe Biden continues to move closer to getting through his $1.9tn stimulus package despite some back and forth with the Senate on what the exact volume should be. This will be in addition to the $4tn that was introduced last year following the pandemic.
On a slightly different note with the vaccination program going in the US the Governor of Texas following 7% of his population receiving the jab has essentially opened the state up and removed the mandate to wear a mask. He declared yesterday “now is the time to open Texas 100%”, it will be interesting to see if many other states follow this trend so early on as it could provide some support to US economic data in the coming months. US data has fallen away from the high growth seen at the end of 2020 however there could be a explosion of growth as the country opens up
US Bond Yields are also expected to rise which could start to see the flow of money return back to US Dollars in the near future 10-year yields, are now up at 1.47% having been close to negative territory at the start of the year. This could certainly have a significant impact on the GBP/USD rate which has spent the last week under 1.40 despite and should this yield rate continue to rise this trend could continue with the GBP/USD moving lower as money flows into the US dollar.
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