- The Pound Sterling edges higher above 1.2700 as investors seek fresh insights on the interest rate outlook.
- The measures outlined in the United Kingdom budget 2024, announced by the Chancellor of the Exchequer Jeremy Hunt, were majorly aligned with expectations. Hunt announced a two-percentage cut to National Insurance Contributions (NICs), saving the average earner around 450 pounds this year. Combined with last year’s cut, total savings for workers would be 900 pounds.
- Jeremy Hunt announced that the OBR had raised growth forecasts for 2024 and 2025 to 0.9% and 1.9%, respectively. The administration intends to increase defense spending to 2.5% of the Gross Domestic Product (GDP). Capital gains tax on property sales will be lowered to 24% from 28%. The government has extended the freeze on fuel and alcohol duty.
- Going forward, market expectations for rate cuts by the Bank of England will guide the Pound Sterling. Investors expect the BoE to start reducing interest rates in August. However, BoE policymakers have said that they want evidence of inflation returning sustainably to 2% before taking such a decision.
- On the other side of the Atlantic, the United States ADP Employment Change for February and JOLTS Job Openings data for January pointed to slowing labor demand. This has built downside pressure on the US Dollar. The US Dollar Index (DXY), which measures the Greenback’s value against six major currencies, has revisited a monthly low near 103.20.
- The uncertainty over the timing of the Federal Reserve rate cut continues, as Chair Jerome Powell said, "We do not expect it will be appropriate to reduce policy rates until we have greater confidence in inflation moving sustainably toward 2%," in his prepared statement in the semi-annual monetary policy report delivered to Congress.
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