Sterling surges after budget

Good morning. The pound has surged following yesterdays budget. We’ll look at the reasons why in a moment, along with where rates may move in the short to medium term. First, the usual snapshot of rates as at 08:30am 23rd June 2010:

  • GBP/EUR 1.2102
  • GBP/USD 1.4865
  • GBP/AUD 1.7070
  • GBP/NZD 2.1035
  • GBP/CAD 1.5319
  • GBP/CHF 1.6451
  • GBP/ZAR 11.225
  • GBP/JPY 134.41
  • GBP/NOK 9.600
  • EUR/USD 1.2280

Sterling surges after budget

The pound gained as investors concluded that the budget yesterday addressed the fiscal concerns over the deficit, and the AAA credit rating of the UK is safe for the moment. You can read a full report on the measures here on the BBC site.

It seems George Osborne got the balance right between spending cuts and tax rises. There were no real surprises, and immediately after the budget there was little to no movement for the pound. Later in the day however when the US markets opened, the pound surged due to increased investor confidence, and this morning we’re close to new highs against both the Euro and US Dollar.

It would seem the markets have approved the budget, and it’s all to do with investor confidence. Now that there is a robust plan to reduce the deficit, investors are more confident as the UK’s credit rating is now safer than thought. Confidence in the UK has increased, and the pound has risen as a result. Given the persistent doubts over the EU e