Reeves gives herself time to 'get ducks in a row' with budget date
Sterling is reeling following a brutal week so far as investors ditch UK assets in response to the panic selling in gilts, particularly in the long-end of the curve.
Of course, this is partly a global issue, instigated by fears over Fed autonomy and the sense that central bank officials may be prepared to allow US inflation to run hot. Concerns over the fragile state of the UK’s public finances, which simply refuse to go away, are fanning the flames, however, and the bond vigilantes are circling like vultures.
Chancellor Reeves has given herself plenty of time to get her ducks in a row, opting for the latest possible date to call her autumn budget.
But, markets are fickle, quick to judge and slow to trust, and will punish the government if they fail to deliver a plan that guarantees fiscal sustainability.
Further tax hikes are almost certain in order to plug the black hole in the public coffers, but that alone won’t wash, with investors baying for spending cuts, wary of a perpetual tax trap that could choke the life out of the UK economy.
Author
Matthew Ryan, CFA
Ebury
Matthew is Global Head of Market Strategy at FX specialist Ebury, where he has been part of the strategy team since 2014. He provides fundamental FX analysis for a wide range of G10 and emerging market currencies.
