As Sunak unveiled his Budget in the House of Commons yesterday, the UK’s vaccine advantage and broadly stable global equity markets kept the Pound competitive. With the Budget being well received by markets, GBPEUR tested the 1.16 handle, but was unable to surpass 1.1558. While the announced tax hikes were not as drastic as some anticipated, Sunak said that his tax changes are “a fair way to help solve the problems that we need to”. As expected, the Budget made no changes to rates of income tax, national insurance, or VAT. In an interview with Sky News this morning, the Chancellor stressed the importance of this, noting that “crucially what people need to understand is no one's take home pay that they have today is affected or lowered by this policy.” While it does “remove the incremental benefit that they might have experienced in the future as inflation fed through to their wages”, peoples “current cash take home pay isn't affected”.
GBPUSD made a loss in yesterday’s session as it stays cemented below the 1.40 mark. Cable opened Wednesday at 1.3981 and closed the day at 1.3975.
GBPEUR attempted to reach the 1.16 handle in the early afternoon but met heavy resistance and fell into the low 1.15’s. The pair started the session at 1.1562 and despite all the volatility, was able to close at 1.1575.
EURUSD also had an exciting session yesterday, reaching 1.2110 early in the day before losing momentum and closing below 1.2075. The pair started the day on the cusp of 1.21 at 1.2093 and finished the day at 1.2072.
When delivering his Budget, Sunak said that he hoped to repair the “acute damage to the economy” as a result of COVID-19. He noted that it is “going to take this country, and the whole world, a long time to recover from this extraordinary situation”. In an effort to ensure stability furlough will be extended until the end of September and support for the self-employed also to be extended until September as 600K more self-employed people will be eligible for help as access to grants is widened.
The Chancellor also announced a sharp rise of Corporation tax on company profits. For companies that profit over £50,000, rates will rise from 19% to 25% in April 2023.