GBP price, news and analysis:
- UK Chancellor of the Exchequer Rishi Sunak will present his Budget to the Westminster Parliament at 1230 GMT Wednesday, promising more spending short-term, followed by moves to fix the public finances once the economy recovers from the damage caused by the coronavirus pandemic.
- For traders, the focus should be on the accompanying economic forecasts from the Office for Budget Responsibility plus the Chancellor’s plans to repair the public finances by issuing Government bonds.
GBP/USD unlikely to move on UK Budget
UK Chancellor of the Exchequer Rishi Sunak will present his Budget to the Westminster Parliament later Wednesday but with many of the measures pre-announced it is unlikely to roil either GBP or the UK stock market.
Sunak is expected to extend the UK’s jobs rescue plan – known as the furlough scheme – to September but also to warn that the public finances will need to be fixed once a recovery is in sight. This will mean further issues of Government debt, with a poll of dealers by the Reuters news agency showing that the UK is expected to sell nearly £250 billion of Government bonds in the coming 2021/22 financial year – the second-highest total on record.
In the same poll, the UK budget watchdog, the Office for Budget Responsibility, is expected to forecast borrowing of £180 billion in the coming year, down from the £394 billion it predicted would be borrowed for 2020/21.
Traders will need to keep an eye on both the borrowing data and the economic forecasts but unless these are far away from expectations GBP/USD will likely continue to trade around the 1.40 mark, where there is currently round-number resistance.
GBP/USD Price Chart, Hourly Timeframe (February 25 – March 3, 2021)
Source: IG (You can click on it for a larger image)
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More generally, the markets remain optimistic that a major US stimulus plan will be agreed, although there is also concern that stocks could be in a bubble and that US Treasury yields could soon rise further. Market sentiment therefore remains positive and that should continue to prevent the US Dollar from strengthening, to the benefit of other currencies including GBP.
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— Written by Martin Essex, Analyst
Feel free to contact me on Twitter @MartinSEssex