Budget or Fudge-it?

23 November, 2017

Matthew Boyle

Yesterday’s focus was on the Pound as we saw the 2017 budget delivered by Philip Hammond to UK Parliament. The market was divided prior as to what the potential impact would be – some suggesting the so-called “Brexit” budget would harm the Pound, whilst others suggested we would, in fact, get a strong budget that would see the Pound gain. Interestingly, in the aftermath of the statement itself, we didn’t see GBP rates move really at all, which would suggest that what was delivered was what was ultimately expected.

GBP rates closed against EUR almost exactly where they opened the day, whilst against the USD the Pound was able to make gains but this was because of poor Jobless claims and durable goods data from the US in the afternoon. Perhaps the biggest thing to note from the Budget in terms of exchange rates moving forward is that productivity and growth forecasts have been cut, as public spending cuts are likely to continue whilst ongoing Brexit uncertainty will impact activity. This doesn’t seem to bode well for the Pound in the long-run, and any strength we are likely to see now must come from positive Brexit negotiations or the potential for a further interest rate hike-  two things which in the short term may not offer a great deal of hope.

Those of you reading this might like to consider your position with rates currently sat where they are given this is largely because of a currently weak Euro, with the possibility that over the coming days negative sentiment towards the Pound could likely resume.

Today’s Economic data releases

Today offers a return of focus towards economic data as we see several releases from around the Globe. Early this morning we have Markit services and manufacturing PMI from both Germany and the Eurozone, followed by UK GDP and business investment ecostats. In the afternoon the main release of note is the ECB monetary policy meeting accounts, whilst early this evening we have Trade & import/export data from New Zealand. We do not have any data from the US today as they celebrate their national holiday of Thanksgiving.

So in what is a quiet day for the Greenback, market focus will lay largely on the Pound and single currency. Following yesterday’s budget and the neutral reaction by the market this could well set a tone for GBP/EUR movements in the short-term, and should we see a poor reading we would expect rates to drop given the current and ongoing poor sentiment towards the Pound.

If you have an upcoming transfer to make, get in touch with your Currency Index account manager today for some friendly and professional guidance. Currency Index can help you protect your budget and prevent your cost from increasing in what is an ongoing volatile and uncertain time for exchange rates.