The Pound is buoyant ahead of today’s mini-budget from UK Chancellor Sunak where he will lay out the government’s plans to kickstart the economy.
He’s expected to announce stamp duty holidays, job placement plans for young adults, green initiatives and potentially cuts to VAT (around 12.30pm today). Many of his plans have already been leaked to the press and some feel the spending won’t go far enough. Traders will be keeping an eye on the announcements and the more spending the better for the Pound.
The mood around Brexit continues to oscillate between fear and optimism. Now the deadline for requesting an extension to the transition period has passed, investors appear to be pushing out the Brexit risks further out into the future. The chief negotiators met for dinner last night and the silence after this meeting could indicate some progress was made. Although separately Boris Johnson told Angela Merkel the UK was ready to leave without a deal at the end of the year. Analysts are now suggesting the business end of these talks will only come after the summer, when we might see bigger Brexit moves in Sterling.
In other news, Covid-19 continues to wreak havoc around the world with spikes in new cases and the re-introduction of localised lockdown measures. Cases are still increasing across US States with the Florida, Texas, California, and Arizona causing the most concern. President Trump continues to dismiss the severity of the virus and his government have announced they are officially leaving the World Health Organisation. News of a second wave in Australia’s second largest city, Melbourne, and the resultant new 6-week lockdown in the area shows that no region in the world is totally out of the woods yet.
As a result, both the GBP/USD and the GBP/EUR have hit a 3-week high. However, both crosses have been trading in relatively tight ranges with no major breakouts so far.