GBP: A Tory Chancellor always pays his debts… or does he? - ING
|The stage is set for Chancellor Hammond to showcase his vision of a post-Brexit economy in this week's Budget (Wed) and despite being hamstrung by a weaker set of OBR fiscal forecasts, it's clear that the global investment community are in dire need of some Churchillian-like words of inspiration over the future of Britain, explains Viraj Patel at Foreign Exchange Strategist at ING.
Key Quotes
“While this is being billed as a ‘Budget for Homes’, what will be equally important is whether we see a marked step away from the austerity years and more focus on public sector spending – where anything beyond the already planned lifting of the 1% pay cap for employees could be seen as winning political brownie points with disillusioned voters. This may prove tricky for the fiscally prudent Hammond.”
“Either way, GBP investors may need to look beyond the minutiae of policy detail in the Budget this week and focus on the degree of economic optimism struck by the Chancellor – especially as this may be fairly indicative of how close the UK government is to breaking through the Brexit impasse. Reports that the Cabinet will back PM May's increased Brexit bill offer is indeed good news for GBP bulls.”
“Also this week, BoE officials will be testifying to parliament (Tue). The panel will comprise of the more hawkish MPC members (Vlieghe, McCafferty & Saunders) – and while this lends itself to some more upbeat commentary, officials will aim to keep their policy cards close to their chests amid a key period of Brexit talks. We also see upside risks to the 3Q UK GDP second reading (Thu). Long GBP/$ is our trade of the week and we eye 1.3400 on a well-received Budget.”
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