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In a relief to the chancellor, the pound help up well after a tricky Budget (Wei Huang / Shutterstock).
John Healey set out to deliver an autumn Budget that would ‘do no harm’ to UK finances. Judging by the initial reaction, it seems he has accomplished this aim.
Government borrowing costs fell on Wednesday and the pound was little changed, reflecting a muted Budget lacking in the usual big-ticket items. There were a handful of targeted tax hikes contrasted with small reliefs, but there won’t be many up and down the country that view this an exciting piece of fiscal ambition.
It must be said that the chancellor’s options were limited by circumstance. Confirming that the spending headroom had shrunk to just £15bn, Healey opted to erode his own breathing room rather than implement sweeping tax increases.
The Office for Budget Responsibility (OBR) delivered a very mixed set of economic forecasts to accompany the statement. Much like the Treasury, its datapoints were informed by the war in the Middle East and all the resulting uncertainty that has created. It now predicts economic growth will fall to a paltry 1% next year with inflation weighing on customer spending and continuing to make debt servicing punishingly expensive.
Last night, the Federal Reserve kept interest rates unchanged after opting for a quarter-point hike at its last meeting. Ahead of next week’s midterm elections, Kevin Warsh pledged to ‘deliver price stability’ for American households worried about prices.
Benjamin Netanyahu looks best placed to benefit from the tight Israeli election. While his party lost its parliamentary majority, several of the largest blocks have ruled out working with Palestinian-led parties, opening the door to a coalition with Netanyahu at the helm either as caretaker or more permanently.
Today looks set to be another bruising session for the tech sector. Alphabet’s shares fell by 10% in early trading after a disappointing earnings release. Futures on the tech-heavy Nasdaq index imply a greater than 1% fall when US markets open this afternoon.
GBP: No news is good news
The pound managed to escape a dangerous Budget unscathed, but the real questions may come further down the line. Investors could contend themselves with a defensive Budget for now, yet the UK’s diminished growth prospects and the challenging economic landscapes may ultimately set the direction for sterling moving forward.GBP/USD: the past year
EUR: Will ECB spring a surprise?
After yesterday’s theatrics, today belongs to the European Central Bank (ECB). The euro opens Thursday slightly weaker against the pound, with currency markets expecting another hold. The recent jump in gas prices on the continent suggests todays decision is far from a done deal.GBP/EUR: the past year
USD: Sticking to the script
The Federal Reserve's decision to leave rates on hold last night confirmed the first leg of what markets are expecting into the end of the year. There is a broad expectation of another hike before the year is out, but as with elsewhere this feels almost entirely contingent on the energy situation. Today's busy economic schedule features the first GDP estimate for Q3 and the always significant Core PCE price index.USD/GBP: the past year
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