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Further covid support in the UK Budget was offset by increased taxes in the next five years. Vaccine rollouts and restriction easing should keep the GBP/USD pair within a lower 1.38-1.43 range, economists at Westpac report.

See:  GBP/USD  to hold below the 1.42 level through the spring – Rabobank

Key quotes

“The UK’s March 2021 Budget once again underscored the extraordinary scale of the UK’s support for the economy. Even though Chancellor Sunak announced yet further extensions and increases in fiscal support to offset the impacts of the covid pandemic, the latest Office of Budget Responsibility Economic and Fiscal Outlook profiles an improved economic outcome from Nov ’20 which pulls down the 2020-21 peak in Public Sector Net Borrowing from 19.0% of GDP to 16.9%.”

“Sunak announced the inevitable lifting of the tax burden in coming years to pay for the fiscal blowout, which is still of a scale unprecedented in peacetime. Markets have taken the Budget in their stride, largely because the bulk of details had been profiled (rather than merely leaked) in the past two weeks.”  

“Data over the coming week is extremely light. This may well mean that markets will focus upon the fallout from the Budget as well as the UK’s successful vaccine rollout (now over 21mn citizens have been vaccinated) and the start of lockdown restrictions being eased from next Monday.”  

“Although GBP/USD has broken below 1.40, it is likely to remain well supported and remain in an effective 1.38-1.43 range.”