Brexit Budget Statement

24 November, 2016

Grace Rae

Yesterday’s focus was very clearly the UK’s Autumn Budget statement. Just after lunchtime the Chancellor, Philip Hammond delivered his first autumn statement to the MP’s at the House of Commons. It was the first major economic statement since the Brexit vote in where he recognised the achievements of his predecessor and started by saying that the task now is to “prepare our economy to be resilient as we exit the EU.” He talked of the Office for Budget Responsibility forecasts for economic growth, saying that growth will be 2.4% lower than it would have been prior to the vote. Government borrowing is set to be £122bn higher and he also made comments on housing, stating a further investment of £1.4bn will go towards the construction of 40,000 additional ‘affordable’ homes. He also told that the National Living Wage will rise from £7.20 to £7.50 from April, for those aged 25 and over.

Following his statement we saw Sterling-Euro rates spike up by a cent bringing a good buying opportunity for those looking to fix a rate. This came as quite a surprise seeing as the result of the statement was not completely a positive one and the Autumn statement has rarely had such a significant effect on rates in previous years. That being said another reason for the Pound’s gains against the Euros were also much to do with the continued Euro weakness ahead of the Italian referendum on the 4th of December and likely to be the markets recovering the losses from earlier in the week.

In the afternoon, we saw a mixed result from the selection of US data. Jobless Claims rose by 1000 from previous, and New Homes Sales also dropped. However, Durable Goods Orders saw a very healthy improvement posting 3.3% above expectations and Markit Manufacturing PMI also posting 0.5 up. Then during the evening the FOMC minutes were released which were as typically expected. we can expect it to be full steam ahead for a rate rise as futures markets are convinced that the Fed will decide to rise interest rates during the next FOMC Meeting in December. The news didn’t come as a big mover for the rates, likely down to markets pre-pricing this decision in at 100% probability of a rate hike.

The day ahead is a fairly quiet one with no data to note out for the three majors and U.S markets closed for Thanksgiving. So if you have an upcoming requirement then it could be wise to secure your currency today. Speak to a member of the Currency Index team today and call 01923 725725 for some friendly guidance on what could potentially affect your upcoming transfers and how we can help secure your currency.