Budget, Unemployment and Bank Minutes today

20 March, 2013

Tom Arnold

The beginning of this week has been dominated by the situation in Cyprus, with the proposed bailout, and the suggested levy from savers bank accounts. This culminated yesterday in a vote in the Cypriot parliament, which gave a resounding ‘no’ to the European Finance Ministers plans. The vote was widely expected to go against the plans, despite revisions which would have seen savers with lower amounts not suffering the levy.

This is very big news in Europe, with further ramifications likely as the more powerful members of the Eurozone flex their muscles and force the Cypriots to contribute in some way to their required bailout. The biggest danger to the Euro is that further bailout countries could be forced into similar measures, which could lead to massive moves out of the Euro as worldwide investors look to protect their cash.

Today however is focused on data from the UK, with unemployment figures out this morning, the Bank of England’s minutes from this month’s policy meeting and then the biggy at lunchtime when George Osbourne will announce the UK’s Budget.

Unemployment has been one of the surprise positives for the UK economy in recent months, so don’t expect too much doom and gloom there, but the Bank’s minutes could be much more negative. There has been much talk of further Quantitative Easing, with some members voting in favour of increased cash injections last month. This has been tempered somewhat by comments from Mervyn King last week, but expect much focus still to be on the voting pattern of the MPC – significant votes in favour of further QE will almost certainly weaken the Pound.

The Budget, despite being a massive announcement for the UK economy, doesn’t necessarily always have a massive impact immediately on the currency markets, as it normally takes some time to digest and is also often more of a long game announcement rather than something which will impact straight away. However there has been talk of a change in the remit of the Bank of England, which might impact its responsibilities to QE, inflation and interest rates, which could very quickly impact the Pound.

So all in all the Pound is likely to be under significant pressure today, but against the Euro there is still quite a bit of positivity due to the continued Eurozone issues. Stay in touch with you CI account manager to be keep best informed on what information could impact your specific currency requirement.