Hammond to be the bearer of bad news?

Philip Hammond could deliver a blow to the UK economy next week when he delivers the autumn statement which is reported to indicate the UK faces a €100bn deficit for Brexit over the next 5 years. This may feed through into lower growth forecasts and could lead to higher taxes, adding to the fear that the UK’s decision to leave the EU will cost us in the longer term.

It seems as though the UK was warned pre-referendum that leaving the bloc would indeed be costly. This is bound to play a factor in Sterling’s strength long term, especially as the budget was expected to be in surplus by the year 2019-2020 as promised by his predecessor George Osbourne. It has already been hinted that the budget deficit will be balanced out with further borrowing on the governments behalf, which could severely harm the Pound’s value.

UK Retail sales figures

UK Spending jumped to a 14-year high yesterday as consumers kept spending, and a drop in the temperature meant that clothing sales rocketed. Yesterday was a tale of two stories, with longer term news regarding the budget deficit potentially harming the Pound’s value, whilst the UK retail sales figures for October surprised analysts, adding a short-term boost for the Pound yesterday.

Consumer spending has defied expectations that the Brexit would lower consumer confidence and is surprisingly contrast with beliefs that the UK will be permanently worse off as a result of leaving the EU. Personally, I believe that the Pound’s value is subdued as a result of this on the FX markets and is currently a conflicting time for anyone looking at buying currency.

In my opinion, the Pound is benefitting from uncertainty elsewhere, with a surprise US election result taking some of the shine off of Brexit. As the high court ruling on December 5th draws closer, anyone buying Euros may want to capitalise on the rates now before we enter a period of extended volatility.

Pound Sterling has found support following a Trump victory but clients should remain cautious ahead of Philip Hammonds statement next week. Speak with our brokers today if youre considering a currency exchange in the weeks ahead. Call us on 01494 725 353 or email me here to retrieve a quote.

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