Autumn Budget could still spell trouble ahead for the Pound

4 December, 2014

Robin Haynes

The Chancellor’s autumn Budget Statement yesterday gave the Pound a boost, with measures designed to stimulate economic activity ahead of next year’s election. But beneath the headlines there was a lack of clarity on what will happen after the election from all parties, with austerity measures likely to continue for some years in the UK. Public spending is set to fall to levels not seen since the 1930s, the budget deficit is still going up, and the Treasury is struggling to balance the books with tax receipts lower than necessary, despite the UK growing more than nearly every other major world economy.

So while politics dictates that we are given good news this close to an election, the medium and long term future for the UK still looks very troubled. Next year’s election is likely to be one of the closest in a generation, with political uncertainty and economic problems we could easily see exchange rates fall in the Spring, despite the current good trading levels for the Pound.

Eurozone in danger of contraction

Today we have the monthly European Central Bank interest rate announcement and accompanying press conference. Mario Draghi’s monthly speech nearly always causes ripples for the Euro, and after yesterday’s disappointing PMI figures suggesting growth is fast disappearing all over the single currency zone. The Euro yesterday weakened against the Pound, giving better rates for buying Euros, after the PMI figures were released and if Mr Draghi announces any concrete plans for a European version of Quantitative Easing, we could see even more attractive Euro rates this afternoon.

There is no other major data due out today, apart from the UK interest rate decision which is a foregone conclusion, so if you are looking to send money overseas in the coming weeks contact us at Currency Index for the latest rates available to save money on your own transaction.