Sterling saw a slight boost against most major currency pairs yesterday afternoon, as Chancellor of the Exchequer Philip Hammond gave the final Budget before Brexit.
There were no major surprises in the budget, although the media was quick to highlight that Hammond suggested Austerity is ‘finally coming to an end’ as opposed to ‘over’. There was an emphasis on Brexit preparations, and his announcement of an additional £500m for Brexit preparations (which comes on top of the £2.2bn already announced) sounds to me like an emergency budget they may not have considered if the Brexit deal had been agreed by now as originally planned. He wasn’t gloomy about Brexit but he did leave the door open for the Budget to be re-written in the case of a no-deal Brexit.
Some of the key points from the Budget are as follows;
Although the speech hasn’t resulted in any major market movements for GBP exchange rates, I expect the allusion to a Brexit emergency fund to carry the potential to be a market mover should it resurface.
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Now that the Budget is out of the way the focus will turn to Thursday’s BoE Interest Rate Decision and the speeches afterwards. I would expect all members of the voting committee to vote against an immediate rate hike, although any surprises could indicate a bullish outlook from BoE members which could push GBP higher. Any references to strong UK inflation and increased chances of rate hikes could also push sterling higher, but I think we’re more likely to see a bearish outlook from the BoE who are likely to be be cautious in the lead up to the Brexit. BoE Governor Mark Carney tends to be cautious in his commentary anyway so those planning on selling GBP should be weary of this. Do get in contact with us if you wish to be updated in the event of a major market movement.
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