Philip Hammond set to give his first Autumn Statement

Sterling fell across the board during yesterday’s trading, and in my opinion, this was mainly due to ‘market jitters’ in the run up to this afternoon’s Autumn statement. At 12.30pm Philip Hammond, the recently appointed Chancellor of the Exchequer, will give his first ‘Budget speech’ since being appointed by Theresa May. The Autumn statement has historically sent shockwaves through the currency market and today’s has even more potential to do so than previous years based on recent political events around the globe.

I believe the chancellor is under extra pressure to reassure the markets in the wake of Brexit.

Some of the measures to be announced are:

  • Reducing the rate at which benefits are withdrawn from people when they start work
  • Putting a stop to upfront fees imposed by lettings agents
  • An increase in the National Living Wage to £7.50 an hour from April 2017

For me one of the key things to look out for will be how Mr Hammond sets out his plans to ‘reset’ the UK’s economy and move away from George Osborne’s plan to reduce the budget deficit by 2020. He has already made claims that this is his plan, but it will be interested to find out how much more in public borrowing he will announce for the next five years, with some rumours that it will be an extra £100bn.

Another key factor will be the office for Budget Responsibility’s forecasts for growth, unemployment and inflation for the next few years and how they believe the economy will cope following Brexit. It is believed that we could see growth for next year revised down from 2.2% to 1.3% since March and if that is the case then we could see the Pound weaken due to a lack of investor confidence. The OBR’s forecasts will be released for the next five years, so it will be particularly interesting to see how they expect the economy to cope in the wake of Brexit.

Anyone with a GBP requirement would be wise to keep a close eye on events as the unfold, and may even benefit from moving before this afternoon to limit your exposure to market volatility, especially with the gains the Pound has made in recent weeks. The Pound dropped by just under 1% against the Euro yesterday, which could have resulted in a difference in your pocket of around €2,500 on a £250,000 transfer.

The Pound may have received a welcome boost for the future yesterday however, following Brexit Secretary David Davis’s first meeting with the European Parliament’s chief negotiator. He described the meeting as a “good start” and that a deal was certainly possible that would be in the best interests of the UK and the EU. It is still early days of course, but if talks continue to be positive then this will likely boost investor confidence in the UK economy and could therefore benefit the Pound. Looking further ahead this week we have UK GDP figures for Q3 of this year, which will give a good insight into how the economy has performed following Brexit. A growth of 0.5% is expected, but if there is any deviation in the actual figure then there could be some further Sterling weakness for the end of this week.

Thank you for reading my Pound Sterling report, in the event you have a currency transfer requirement that needs attention, why not call our trading floor today on 01494 725 353, alternatively, you can email me at rjh@currencies.co.uk.

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