The Pound to US Dollar (GBP/USD) and Pound to Australian Dollar (GBP/AUD) exchange rates were trending higher on Wednesday following Phillip Hammond’s Autumn Budget.
Sterling experienced some losses during the statement as markets digested what the Budget meant for Brexit Britain, but soon after the GBP exchange rate had climbed by around +0.30% against the Greenback and +0.20% against the Aussie.
There were some interesting takeaways from the event, such as the Office for Budget Responsibility (OBR) downgrading UK growth forecasts and sounding slightly miffed with the government’s handling of Brexit. The OBR stated that it had ‘once again’ asked for more information on trade and migration policies from the UK government but had been left wanting. The government suggested the institution take a look at Theresa May’s Florence speech from months ago and consult the trade policy whitepaper produced in February.
The OBR stated:
‘Given the uncertainty regarding how the government will respond to the choices and trade-offs it faces during the negotiations, we still have no meaningful basis on which to form a judgement as to their final outcome and upon which we can then condition our forecast.’
In addition, while Hammond has abolished stamp duty for first-time buyers on property under £300,000, the OBR believes that this will increase house prices and benefit sellers, rather than helping first-time buyers.
While Hammond announced that the minimum wage would be increasing next year, the OBR has cut its forecasts for pay growth. Wages are thought to be increasing by 2.3% in 2018, down from 2.7% and wages won’t catch up with current levels of inflation at 3.0% until 2021, meaning the squeeze on households will persist for longer.
Meanwhile, in the US, Federal Reserve Chief Janet Yellen spoke last night saying that she thought raising interest rates in the US too quickly could pressure inflation below the 2.0% target for longer. Today, the US Durable Goods Orders number came in at -1.2% in October, a far cry from the +0.3% analysts had expected.
In Australia, Wednesday saw the Skilled Vacancies figure come in at 0.5% in the month of October, while Construction Work Done printed at 15.7%.
In the UK tomorrow Gross Domestic Product (GDP) numbers will make their way onto the market.
The Pound to US Dollar (GBP/USD) exchange rate is residing at 1.3290. The Pound to Australian Dollar (GBP/AUD) exchange rate is hovering at 1.7509.