The Dollar’s recent surge came to a halt yesterday as market sentiment became more ‘risk-on’ as equities made a strong rebound. Cable was able to capitalize on the greenback’s misfortune, rising to 1.3971 after the close. The Pound itself traded steady in Tuesday’s session as investors eagerly await Rishi Sunak’s Budget today. While full details have yet to be disclosed, Sunak has made several promises ahead of his speech. He intends to allocate an extra £1.65B to the COVID-19 vaccination effort, introduce a £5B scheme for high street shops and hospitality firms in England, and a mortgage guarantee scheme. Sunak has warned that tough economic times lie ahead for the UK and there has been speculation that some taxes may be raised. The government thus far has borrowed a record £270B fighting the pandemic and must come up with a way of paying it back.
After a sluggish start to the week GBPUSD was able to catch some upside in yesterday’s session. Opening at 1.3880 the pair went on to close the day at 1.3950. Sunak’s Budget will more than likely induce further price action for the pair.
GBPEUR in contrast was stagnant yesterday, trading flat for most of the session. The pair started the day at 1.1561 and closed just 3 pips above that mark at 1.1564.
EURUSD also saw little movement on Tuesday. The pair opened at 1.2065 and closed at 1.2063.
Returning to today’s budget, Mr Sunak has noted that he will use this opportunity to “level” with the public about the economic challenges the UK will face and the need to repay the vast sums of public money spent during the pandemic. By sicking to the Conservative manifesto pledge not to raise income tax, national insurance, or VAT, it is widely speculated that Sunak will increase corporation tax. A hike from the current level of 19% to 23% is deemed by many as quite likely, and this move by the Chancellor would also bring in an estimated £12B.
On the data front, it’s a busy schedule with Services PMI releases from the UK, Eurozone and the U.S. The U.S. weekly Jobs Report will also be released at 13:15 and then later in the evening we have speeches from Fed members Harker, Bostic, and Evans.
