The pound fell to the bottom of the pile against most majors through yesterday and this morning’s trading session, as speculation mounted that the much anticipated March spending budget will be delayed, as the new chancellor struggles to make an impact in his new role.
Sadly for sterling, the Government’s flip-flopping on whether or not to splash the cash and “level-up” Britain and its economy is now damaging confidence in its currency. Ironically for the UK, the Government is now wondering if now is the right time to loosen the purse strings, as the economic outlook doesn’t look good – the very reason the Government wanted to relax its spending restraints in the first place. Needless to say, this high-level bungling over critical policy has not gone down well within the markets, knocking 1.30% off GBPEUR and 0.90% from GBPUSD.
To oversimplify, currency markets crave one thing to push higher: certainty; so when a Government cannot stick to a policy platform it launched just two months ago, the lack of confidence reverberates through markets.
Data-wise, we have a slew of economic data out at 13.30 GMT for the USA, with the dollar coming back into the firing line, after submitting the three-and-a-half-year highs against the euro this week. The chances of a Federal Bank interest rate cut at the next meeting have increased to 56.2%, pushing dollar traders to start taking profit on their positions and selling across the board.
Have a great day,
Author: Joshua Haden-Jones, Senior Relationship Manager
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