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.

The day ahead

The second estimate of Q3 UK GDP is released this morning which will provide the first look into the expenditure breakdown, which we suspect will show that consumer spending will have provided more support to growth. At the same time, we see figures for the services sector and business investment in the three months to September, with the latter possibly giving a steer as to whether the post-Article 50 uncertainty has impacted on capital spending. Over on the continent, the account of the European Central Bank’s October meeting will be released giving more clues as to how the Governing Council reached the decision to ‘recalibrate’ it’s QE programme through to September 2018. We have no data out from the US due to the Thanksgiving holiday.

Thought of the day

The Ashes Cricket Series played between Australia and England started today. This famous series is held every two years roughly, with the winners claiming one of the most famous (and smallest) trophies in Sport - a six inch terracotta urn reputed to contain the ashes of a burnt bail! As to why the series ended up having this peculiar name, the term 'Ashes' was actually first used after England lost to Australia for the first time on home soil - at The Oval on 29th August 1882. A day later, the Sporting Times carried a mock obituary of English cricket which concluded that: "English cricket had died, the body will be cremated and the ashes taken to Australia". With the Brexit gloom and doom continuing to hit the headlines, a year end run-in that includes an EU Summit, Bank of England, a possible Fed rate hike too, one certainly hopes that: “The Pound doesn’t die, Sterling crosses won’t be cremated and UK trade doesn’t end up in Ashes too!” Please speak to your FX dealer today if you’d like to be included on a conference call with our Chief Economist in early December to get his thoughts on the current state of affairs and the year ahead (the provisional date for the call is 6th December 10am).