Pound lower after budget due to USD Strength

GBPEUR

Sterling lower after Budget

The Pound is a little lower against the Euro and other currencies today. The budget was largely a non-event as is normally the case. Despite the fact that it was a generous budget and growth forecasts were moved up and borrowing were revised down, the Pound struggles to react positively. Markets are seemingly more focused on Brexit negotiations.

The next main event for the Pound will be Thursdays Bank of England announcements. I think that now wage growth has picked up, there is a case for another interest rate hike early next year. However I think that they will hold off signalling another rate hike until the Brexit picture is clearer. Ultimately, as regular readers will be well aware of, any Sterling gains are unlikely until the EU and UK sign off the withdrawal agreement and move on to trade talks.

Despite the budget having little effect on the Pound, Sterling fell against most majors yesterday and again this morning. This is largely due to a strengthening US Dollar.

USD Strengthens pulling GBP/USD rates lower

Trade war fears have been strengthening the US Dollar of late. There are more reports of the USA planning to announce further tariffs on Chinese goods, in an escalation of Trumps trade war. A general weakness in the Euro caused by investors worried about Italy and the EU at loggerheads over their budget and spending plans.

Italy, Trade War fears, combined with Brexit fears have driven investors towards the relative safe haven of the USD. This is why the Pound has fallen. GBP/EUR has dropped to around the €1.12 mark and GBP/USD has fallen to new lows of $1.2750.

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