How does Chancellor Reeves find £30BN??
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| Since her last budget, Rachel Reeves has seen an unexpected gigantic hole of £30BN open up in finances.
Raising National Insurances and 'stealth taxing' UK businesses and consumers has not worked. The jobs market has fallen in most months since Labour came to power. Bond yields are far higher than the 'Truss era' and the current Government are under immense pressure from all sides.
So what will Reeves do come November 26th?
In terms of the Pound, likely nothing good. It's a huge risk event for GBP because no-one knows what the outcome will be and exactly what it will mean both near & long term for £.
But, there is a small glimmer of hope for two possible outcomes that could surprise most..
What if the Pound's value has already priced in the worst?
What if the Chancellor pulls a rabbit out of a hat?
In terms of Q3 for the Pound, it was simply a disaster. There was a lot of hope (that word again) that the summer would bring 'good vibes' before the dark clouds gather in Q4.
Instead, traders and investors brought forward proceedings which ultimately killed all other variables at play. Economically, the UK fared rather well (as expected), but bond yields simply took over the narrative and it has been no surprise to see what has happened next.
GBP v EUR lost a very disappointing 1.7% in Q3, meaning on a £ - €200,000 exchange, it has cost £3,000 more. The high point was the average for the year at 1.1640 on July 1st with a low of 1.1430 hit multiple times this month.
GBP v USD lost 2.2% and saw a massive swing in the month of July which saw both high (1.3743 on July 1st) and low (1.3206 on July 31st) points in the quarter hit.
We have very little economic releases due out of the UK this week, so the Pound will be moved by events elsewhere. |
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