How will the Budget influence Sterling exchange rates?

The Spring Budget is due to take place on Wednesday 6th March. With a possible general election looming this Budget will be likely to try and persuade voters to keep the Tories in power.

As the UK recently fell into recession after falling by two quarters in a row it is not expected to last for too long.

The Bank of England governor Andrew Bailey has already suggested that it may be over and has told MPs the same.

The Chancellor Jeremy Hunt is due to cut taxes but with an economy under pressure the tax cuts may not be too big.

According to some other reports National Insurance is also due to be cut but this could reduce the government’s spending. However, arguably if people have more money to spend this could help to boost the economy so there is a fine balance to be made.

If the Budget is taken well this could lead to a small recovery for Sterling exchange rates against both the Euro and the US Dollar.

Sterling vs both the Euro and the US Dollar has been range bound since the start of the year. Monetary policy has remained unchanged both here and on the continent and it doesn’t appear to be changing anytime soon.

Inflation still remains higher than required which has decreased the chance of an interest rate cut happening anytime soon.

Therefore, it is likely to be other political and economic developments that are likely to influence what is happening to Pound exchange rates as we move into March.

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