Labour comfortably win my comment of the week award
In fairness to the Chancellor, the need to balance the books against a background of much uncertainty makes every bit of sense. This can be said given the ever-increasing cost of borrowing for the government from those three BoE rate hikes, and the potential for both domestic and global economic slowdowns further down the road. However, many were left feeling pretty flat after the Budget and perhaps somewhat out of an already empty pocket, as the recent cost of living increases will only be partially improved by the assistance from the chancellor.
Driving miss, daily
That 5p cut (per litre) in fuel duty (as of yesterday evening), saves the average car owner around £3.30 per tank of fuel, according to people in dark rooms who understand the math behind all this. 30 odd million workers also got themselves a national insurance cut, which amounts to about £6bn in savings to the consumer. However, that figure will be completely eroded by around £12bn worth of other tax rises elsewhere. The Chancellor giveth with one hand, and he taketh twiceth with the other.
Looking ahead, the Chancellor also promised to cut the basic rate of income tax by the next general election in 2024.
In for a penny
Sterling slipped on the day, perhaps in part due to that Budget statement, although markets had a risk-off day and that probably had as much to do with the move, given sterling’s tendency to move on risk appetite. GBP/USD was threatening to break above 1.3300 yesterday morning, but had slipped 100 pips lower by the European close. GBP/EUR continues to exhibit tendencies to try and live life above 1.2000.
Dollar up and dollar down
The greenback continues to trade in a far less holistic manner. EUR/USD spent most of yesterday hugging the 1.1000 region. A distinct lack of keynote data or events in Europe and the U.S on the day has helped to mitigate short-term volatility and spot price movement here. The rapid upside rally for USD/JPY took a breather yesterday after reaching the 121.50 resistance level. A slew of hawkish comments on rates by a splattering of Fed officials have fuelled that particular fire this week.
USD/CAD has caught the eye, with the pair gyrating toward the year to date low of 1.2450. Oil prices remain firmly above $100, which is a factor. That move is in part due to supply worries, and further sanctions on Russia. Russia have responded by saying that unfriendly countries should pay for energy in roubles. Given the broader strength of the greenback, that move in the Loonie is noteworthy.
Today is packed with data and speakers. The SNB will announce the latest Swiss interest rate decision. Markets are not expecting any major changes, although inflation is likely to make an appearance in the Monetary Policy Assessment. The latest German and broader Euro-area PMI readings are due, and given the war in Ukraine, an expected drop across the survey is the order of the day. UK PMIs are also due, with the key Services component likely to drop from 60.5 last month to around 58. The latest Durable Goods Orders are out in the U.S. Markets expect a 0.5% decline after the 1.6% gain last month.
Ukraine’s Zelenskyy is speaking, as well as the ECB’s Elderson, who appears to be speaking twice today for some reason. The Fed’s Waller, Evans and Bostic are all speaking today too. They might have a hawkish tone.