Market Brief: Hammond survives Budget unveiling
11 Sep 2018
Yesterday Chancellor Phillip Hammond delivered his budget and on our calculations, has delivered the most expansionary budgetary exercise since Alistair Darling cut VAT in the late 2008 pre-budget report.
Today's data releases |
Key levels | |||
---|---|---|---|---|
09:30 | UK GDP data | Support | Resistance | |
12:30 | EZ ECB account of the monetary policy meeting | GBP/USD | 1.3057 | 1.3338 |
18:10 | EZ ECB's Coeure speaks | GBP/EUR | 1.1071 | 1.1352 |
Market overview
Yesterday Chancellor Phillip Hammond delivered his budget and on our calculations, has delivered the most expansionary budgetary exercise sine Alistair Darling cut VAT in the late 2008 pre-Budget report. Although the OBR has revised up its borrowing projections, this is due to Hammond’s generous fiscal stance alongside the downgrade to productivity growth. Sterling saw choppy trading as it set a fresh daily low and new high within 90 minutes or so of the Autumn Budget statement. In the event, the Chancellor delivered nothing unexpected in this Budget with a clear tilt to win popularity with the younger voters with a couple of new measures: this includes a 26-30 railcard and a stamp duty relief for first time buyers under certain conditions. However Hammond’s attempt to help young people into the housing market underwhelmed investors and sent home-builder stocks tumbling. This was Mr Hammond’s second budget and he will be hoping it wasn’t his last!
Stateside, the minutes from the 1 November FOMC meeting painted a generally upbeat tone on economic conditions. Policy was left unchanged and it was noted that the labour market was operating at or above full employment and that GDP was likely to grow at a pace exceeding that of potential output. The minutes also noted the tax plans currently being worked through Congress and the positive impact that they could have on investment. There were two other notable areas of discussion. Firstly, the debate over the recent period of low inflation intensified, with some officials sharing Chair Janet Yellen’s concern over soft inflation, as the dollar remained under pressure. Many policy makers did however still see a “near term” rate hike as warranted. Secondly, the minutes revealed that several members were growing increasingly concerned about financial imbalances growing due to ‘elevated asset valuations and low market volatility’ and the effect that a sharp market correction could have on the economy. Overall, last night’s minutes do not change our view that the Fed will increase the Fed funds target range 25bps to 1.25-1.50% at the 13 December meeting.
Stateside, the minutes from the 1 November FOMC meeting painted a generally upbeat tone on economic conditions. Policy was left unchanged and it was noted that the labour market was operating at or above full employment and that GDP was likely to grow at a pace exceeding that of potential output. The minutes also noted the tax plans currently being worked through Congress and the positive impact that they could have on investment. There were two other notable areas of discussion. Firstly, the debate over the recent period of low inflation intensified, with some officials sharing Chair Janet Yellen’s concern over soft inflation, as the dollar remained under pressure. Many policy makers did however still see a “near term” rate hike as warranted. Secondly, the minutes revealed that several members were growing increasingly concerned about financial imbalances growing due to ‘elevated asset valuations and low market volatility’ and the effect that a sharp market correction could have on the economy. Overall, last night’s minutes do not change our view that the Fed will increase the Fed funds target range 25bps to 1.25-1.50% at the 13 December meeting.