UK Chancellor of the Exchequer Phillip Hammond is delivering the budget in the British parliament. He says that the economy is confounding those who talk it down. However, the lower growth forecasts are sending the pound lower, to 1.3225 1.3214.
GBP/USD was trading around 1.3250 ahead of the speech, entrenched in the recent range: between 1.3220 to 1.3270. Further resistance awaits at 1.3320, which is the top of the range. Further support is at 1.3180.
Some points from his speech:
- Setting aside another 3 billion pound for Brexit preparations
- Getting ready for the future and ready for it
- Maintaining a balanced budget
- Prosperous and inclusive economy
- Still 1.4 million people out of work
- Forecast for 600K more people in the forecast horizon.
- Productivity growth has remained stubbornly flat.
- GDP forecast to stand at 1.5% in 2017, 1.4% in 2018, 1.3% in 2019, and 1.3% in 2020.
- Inflation to 3% peak now, then returning to around 2%.
- Debt to peak this year and then to fall as the share of GDP beginning next year.
- Borrowing is expected to fall gradually.
- Promises higher investment
- New funds for research and development, including for Artificial Intelligence.
- He blames the Labour governments for increasing the debt.
- The tax system will play a role in helping the environment.
Preview: GBP/USD: Trading the UK budget – two opinions
Hammond goes on and on to describe new plans and initiatives by the government, which are not market-moving. The lower forecasts are taking their toll, even though they are not a huge surprise. We already know that the economy has slowed down significantly in 2017.
Brexit took its time but now it is taking its toll.
Here is the slide on the pound/dollar chart: