By Lauren Buckner
Sterling has finally seen some positive momentum over the past few days following last Friday’s positive GDP figures and yesterday’s buoyant UK employment data.
Riding on the crest of the wave, and trading in the upper range of this year’s range against both the Euro and US dollar, today’s budget announcement is likely to determine the market’s next move.
In his capacity as Chancellor of the Exchequer Jeremy Hunt is a rather unknown entity having held a relatively low profile since appointment, today will be of significance to so many in the UK faced with ever increasing rates of inflation and severely lagging wage growth.
It is believed that some relief is on hand with an announcement already that the energy price freeze commitment will be extended from April to June and predictions of free childcare for 1 & 2 years olds is to be announced to make it easier for both parents to return to work amongst other growth centric announcements. A beacon of positive sentiment ahead of this lunchtime’s announcements continues to support the Pound, but we must not forget that Hunt is not afraid to make difficult and unpopular choices as his time as Health Secretary proves, will Rishi Sunak be steering him in the right way?
We have seen GBP treading levels around a 4 week high versus the USD with the current headwinds assisted by the collapse of Silicon Valley Bank and intervention by both US and UK governments to protect the money held. Following news of a bad debt book a significant and speedy run on the bank occurred on Friday (very 2008ish) and caused the bank to fold. The spotlight will likely remain on the US Banking system for some time as ripples of fear of a financial crash grip investors. This could see the USD finally under some pressure following an incredibly strong start to the year.
Tomorrow we have even more big data expected from the European Central Bank meeting where a 50 basis point raise in interest in the Eurozone is predicted. This should already be baked in to current exchange rates so any divergence from this is likely to cause a stir. Of significant importance will be the accompanying press conference and indications from President Lagarde of the future policy stance. Typically incredibly cautious on their internet rate policy the recent SVB events could startle the ECB off course for fear of over stressing a delicate economic balance. This could be favourable for the Pound.
It feels as though big events may be coming like buses at the moment – we have waited for weeks for something to tip the balance in the Pounds favour and now it’s all happened at once – do not be fooled though. Currency markets are a fickle thing and will easily once again round on the Pound if the data suggests any reason for weakness and with the Bank of England meeting in sight late next week it could be a case of making hay while the sun shines! Get in touch with A Place in the Sun Currency today to discuss your own requirements further.