Alistair Darling is not the Pound’s friend. In his budget release, he pounded the Pound like no economic indicator did. Here’s a roundup of the Big Day in Britain:
At 8:30 GMT, 6 economic indicators were released:
- Claimant Count Change, was better than expected, at 73K instead of 118K. This should have lifted the Pound, as it’s the most important unemployment indicator.
- MPC Meeting Minutes: No surprises. The distinguished members voted unanimously to leave interest rates unchanged, and to continue the asset buying plan.
- Average Earnings Index: Rose by on only 0.1%, much less than 1.4% that was expected. Not good for GBP!
- Public Sector Net Borrowing Rose to 19.1 billion, not far from early expectations.
- Prelim M4 Money Supply, expected to rise by 1.2% after last month’s rise of 1.4%, but was left unchanged. Somewhat disappointing.
- Unemployment Rate, expected to rise from 6.5% to 6.7% – exactly what happened. Though this is a late figure and the expected result, the media “celebrated” on this figure – the worst in 12 years.
After these releases the Pound was shaky, but didn’t make any astounding move. It sure moved on Alistair Darling’s annual budget release, which was staggering.
Annual Budget Release: at 11:30 GMT, showcased many headlines:
- New Taxes: on smokers, motorists, and rich people in general, but this isn’t enough.
- Record Borrowing: 269 billion Pounds will be borrowed to help fund the government’s budget. Maybe this won’t be so much quite soon…
- Gloomy Forecast: Darling expects the worst recession since World War II, not so good for his boss Gordon Brown, wishing for re-election next year.
This is far worse than what economists were expecting. The British government’s deficit is huge.
All these worries sent the Pound diving: GBP/USD bottomed at 1.4398, providing a new low for this week. It later bounced back to 1.4484 (at the time of writing). This still is below the levels before the announcement. Also EUR/GBP and GBP/JPY went strongly against the Pound.
So, this day made it’s promises: the Pound got pounded quite badly in this critical week. The Pound takes a break for one day, and then returs for the Grand Finale on Friday. The only indicator due tomorrow in Britain is the CBI Industrial Order Expectations.
Check out the Forex Weekly Outlook for more on Friday’s events.
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