UK BUDGET PROMISES A LOT OF EXCITEMENT FOR THE POUND STERLING – COMMERZBANK

Chancellor of the Exchequer Jeremy Hunt will present the new budget today. Economists at Commerzbank analyze how the Pound Sterling (GBP) could react to the economic plans and changes to fiscal policy.

New British budget might result in a volatile Pound

The reaction will certainly depend very much on the extent of the relief in the end. And, above all, whether the Bank of England is trusted to manage this higher spending. One thing is certain: an expansionary fiscal policy will likely make it more difficult for the BoE to bring inflation under control in the long run.

Given the uncertainties, it is difficult to make an accurate forecast for the Pound. 

If the market believes that the BoE will respond to the increased spending with later rate cuts, the GBP could benefit again today. On the other hand, if the cuts are significantly higher than expected, doubts may prevail and the Pound may suffer as a result.

One thing is for sure, today's Budget promises a lot of excitement for the Pound.