The UK’s adherence to a strict austerity programme has helped sterling to appreciate 3% against the US dollar since the beginning of the year. GBP/USD hit a high for 2012 of $1.5990 a couple of weeks ago. Since then, it has been the surprisingly upbeat US economic news that has led to a softening in GBP/USD.
This should prove an interesting week, with little US data and an abundance of UK figures due for release. From a UK perspective we have the latest inflation figures later today, the BoE minutes for March and the Chancellor’s annual budget statement tomorrow, followed by retail sales on Thursday.
The UK’s current austerity plan means that the public finances will not allow any unfunded giveaways in this budget. Interestingly it is estimated that by the time of the budget, around 70% of all planned tax rises will have been implemented but only around 10% of the planned public spending cuts. With the spending axe about to fall the risk to GDP growth in 2012 will heighten. Consequently, GBP is likely to remain sensitive to any surprises in the economic data releases going forward.
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