Sterling Recovers Poise as Hammond Delivers Budget

Hammond Budget Update: Sterling Recovers

  • Growth revised up
  • Inflation to peak at 2.4%
  • Debt to start to fall in 2018/9

Sterling rallies from lows.

The pound fell to a low of 1.2140 this morning as concerns over the prospects for growth in the U.K. economy started to take hold.

Chancellor of the Exchequer Philip Hammond started to deliver his spring budget just after non and sparked a rally for the pound. He has admitted that the robust performance of the economy since the Brexit decision has not only perplexed markets, it has confused him too.

Hammond has upgraded the official forecast for growth in 2017 from 1.7% to 2%. This will be received skeptically by traders who have seen the service sector frow at a slower rate predicting Q1 growth at just 0.4%.

The Chancellor also said he believes inflation would peak at 2.4% some time in mid-2018. Again a very optimistic view given the value of the pound and the fact that the inflationary effect of its recent fall hasn’t been fully priced in. Any further fall in the value of he pound following the triggering of Article 50 will also drive inflation higher.

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The markets have taken Mr Hammonds words at face value and the pound rallied by 0.35% to trade at 1.2180.

A more detailed analysis of the budget will appear in our daily market report tomorrow.

Have a great day!

About Alan Hill

Alan has been involved in the FX market for more than 25 years and brings a wealth of experience to his content. His knowledge has been gained while trading through some of the most volatile periods of recent history. His commentary relies on an understanding of past events and how they will affect future market performance.”