Sterling Awaits Budget Today

The UK’s emergency budget to be delivered by the Chancellor at 12.30 pm today is expected to bring the most rigorous spending cuts and tax increases in a generation. The Pound is likely to experience volatility and in all likelihood decline if investors lose confidence in the UK recovery as a result of today’s budget. To discuss how the budget may affect your foreign exchange transfers and whether you may want to fix a rate in advance speak to your broker today. For an update on how the budget is affecting currency markets see the news update on the Currency Solutions website this afternoon.

Pound Sterling – UK Markets

The Pound has retreated from a near five-week high against the Dollar in advance of the emergency budget today. The Chancellor and the newly created Office for Budget Responsibility over the past week have given a bleak picture of the state of the UK deficit and prepared the nation for the worst. Investors may lose confidence in the state of the UK recovery once the budget is announced. It is expected that Osborne will be cutting the budget down by £85 billion. The budget is expected to certainly cause movement in the Pound and this may also in turn affect other currencies that could gain from any weakness the Pound experiences. Speak to your broker today about any transfers you may have on the horizon in case you want to fix a rate in advance to protect yourself from volatility.

US Dollar – US Markets

The expected loosening of the Chinese Yuan’s two year peg to the US Dollar announced on Sunday is being treated as a long term change. Ongoing developments with the European debt crisis have caused the Dollar to rise against most major currencies on Monday. Dollar investors are looking ahead to the G20 summit this weekend as well as the US Federal Reserve’s decision on interest rates – the Federal Reserve begin a two day meeting today to discuss this but it is expected to keep interest rates at historic lows.

Euro – European Markets

The Euro has fallen for a second day against the US Dollar but is gaining on the Pound in the run up to the UK budget. The Swiss Franc has also significantly gained on the Euro. Today traders will be looking at a survey on business confidence in Germany, the single currency’s largest economy, which is expected to show a decline of confidence as well as seeing how the UK budget may affect the Euro.

Other Currencies – Highlights

The weakness in the single currency has caused the Japanese Yen to strengthen to a one week high against the Euro as a refuge currency. The suggested change in China’s currency policy is expected in the long term to boost Chinese consumers spending power and decrease US spending on imports as they become more expensive.