Good Morning. Sterling slipped yesterday after data showing a slowdown in UK consumer price inflation reinforced expectations that price gains may have peaked, and that monetary policy would stay loose for some time. Markets now await today’s budget.
Rates @ 08:30am are as follows:
- GBP/EUR 1.1174
- GBP/USD 1.5018
- GBP/AUD 1.6380
- GBP/NZD 2.1311
- GBP/CAD 1.5260
- GBP/CHF 1.5945
- GBP/JPY 136.46
- GBP/ZAR 11.008
- EUR/USD 1.3431
Chancellor Alistair Darling is preparing to deliver his third budget today, the last before the general election. He is expected to describe it as “a Budget to secure the recovery and invest in our industrial future”.
New tax rises and spending cuts are unlikely to be outlined, ahead of the election expected to be held on 6 May. But Mr Darling might spell out more details of where the government expects to make £11bn of public sector efficiency savings by 2012/13.
Latest figures suggest that government borrowing might be nearer £170bn, largely due to lower than expected unemployment. It is the huge debt and borrowing levels that have been helping to keep Sterling very weak, and so markets will be looking closely on what plans there are to reduce the debt.
The BBC’s chief economics correspondent Hugh Pym said the financial markets – which have to fund the government’s borrowing – will not be impressed if Mr Darling does not reduce the deficit as much as he can.
Labour and the Conservatives have clashed over when the government should start reducing spending to tackle the budget deficit, which is among the highest in Europe. Just last week the European Commission criticised the government’s plans to halve the deficit in four years, saying they were not ambitious enough.
On Tuesday, Conservative leader David Cameron urged the government to reconsider its commitment to increase public spending this year and said delaying cuts in government programmes to next year was “ludicrous”.
Without prompt action to tackle the deficit, the UK faced slipping into a “danger zone” with rising interest rates and eroding confidence in the financial markets.
Lib Dem Treasury spokesman Vince Cable told the BBC on Tuesday: “One of the key tests of the government tomorrow is whether they are willing to be specific, willing to be open about what they are going to cut.”
Today is all about what cuts are announced in the budget. Sterling will likely have a volatile day as markets react to the budget which is expected to be delivered at 12:30pm.
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