Sterling remains relatively stable at around the €1.16 mark vs the Euro, having strengthened by around 5% in the last fortnight. The most important event for the Pound in the coming week is the Autumn statement from new chancellor Philip Hammond. In today’s post we’ll have a look at how this may affect exchange rates.
What is the autumn statement?
First things first, what is it? The government make 2 economic statements each year, the budget in Spring, and the autumn statement which is this Wednesday at 12.30pm. It outlines things like economic projections and spending. This one is very important because it will outline how they plan to steer the economy in the run up to trigger article 50 and begin negotiations to leave the EU.
How could it affect the Pound?
Previous statements have usually tended to be a bit of a damp squib, with most information already leaked to the papers well in advance, and in previous years it hasn’t had much of an impact on exchange rates. This one is different however, as this will give an outline of how they intend to tax and spend in the run up to the beginning of the process to leave the EU, and so it is likely to have more of an impact than usually on the currency markets.
What is it likely to contain?
New fiscal rules will probably be announced and I think we’ll see Hammond abandon Osbornes’ pledge to ‘balance the books’ by 2020. Brexit has changed things and so they need to deal with the possible impact of this. There’s speculation that infrastructure spending may increase that could be positive for the Pound. Too much stimulus could be a bad thing though, as focusing on risk and uncertainty could be self-fulfilling, when the economy at present seems to be performing well.
Hammond hinted at interviews over the weekend that business investment was slowing, inflation rising, and government debt being at ‘eye-watering’ levels. The key will be what the markets think about the contents and the reaction for the Pound will depend on any hints it gives on the direction they will take in the run up to Brexit. There will also be a forecast from the OBR. It may well be that like previous statements there isn’t much of an effect, but in these uncertain times, if the markets think that the Brexit stance has changed one way or the other, there may well be some volatility for Sterling exchange rates.
Getting the best exchange rates
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