UK: Tax plans unlikely to be interpreted as a GBP-positive factor – Commerzbank

On Wednesday, UK Chancellor Jeremy Hunt presented the Autumn Statement. Economists at Commerzbank analyze GBP outlook following the Tories’ tax plans.

Lower taxes and public spending are possibly going to be welcomed by Tory voters

Lower taxes and public spending are possibly going to be welcomed by Tory voters due to the effects on the individual, but I find it difficult to believe that FX traders and/or a large share of the electorate will believe in the Laffer curve. In that case, the tax plans are not going to be interpreted as a GBP-positive factor.

Don’t get me wrong: I certainly do not want to say that this interpretation might not turn out to be correct. Such an assessment would exceed my competence. But for the current development of GBP exchange rates, it does not matter. What matters is how the tax plans are seen today. I can only guess that. There is no watertight way to prove my view. However, the readers who disagree will at least draw the conclusion that it is this kind of sentiment that currently drives GBP developments.