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GBP: Budget announcement unlikely to alter market expectations - MUFG

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Mar 14, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

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    Derek Halpenny, European Head of GMR at MUFG, suggests that the key event this week also takes place on Wednesday with Chancellor Osborne announcing the UK budget at 1230 GMT.

    Key Quotes

    “Osborne has been busy in the media painting a bleaker picture for the UK economy and this is expected to be in preparation for announcing additional spending cuts in order for the government to maintain its target of achieving a budget surplus by 2020. Osborne has signalled public-sector spending cuts will be part of the overall plan to keep the fiscal targets on track with revenue-raising measures like increasing the bank levy and selling assets of the rescued lender Bradford and Bingley also likely.

    The spending cuts are not expected to be immediate and more likely to be loaded for the years towards the end of the parliament and which may well ultimately be matched in the future by an income tax rate cut and hence the budget announcement this week is unlikely to alter market expectations on monetary policy. Certainly though with Osborne planning further fiscal consolidation one could conclude that any downside surprises for the economy will have to be addressed by monetary rather than fiscal policy support.”
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