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Hammond to reveal Brexit Budget

Hammond to reveal Brexit Budget

GBP
Selling pressure around the British Pound remained incessant, with GBPUSD breaking through the 1.2200 level, dropping to seven-week lows on Tuesday. The downturn came after Theresa May faced a second Article 50 defeat in the House of Lords. Market participants believe that the defeat in the House of Lords might delay her deadline to trigger Article 50.

The British Retail Consortium survey showed that like-for-like sales fell 0.4% for February.  Also, the Halifax house price report showed that prices in the three months to February were 1.7% higher than in the previous quarter, down from 2.3% in January. Finally, the annual rate of growth fell to 5.1% from January’s 5.7%, the lowest since July 2013, further increasing the selling pressure on the Pound.

Philip Hammond will present the Budget statement later today with the market focussing on what he will do to shield the UK economy from the potential impact of Brexit.

USD

The US recorded its largest trade deficit since March 2012 as a jump in merchandise imports in January exceeded a smaller gain in shipments overseas. The data increased fears that the Trump administration would adopt more aggressive trade and currency policies in an attempt to lower the deficit, undermining the Dollar. The gap in goods and services trade increased by 9.6% to $48.5 billion, matching expectations.

The IBD consumer confidence index declined slightly to 55.3 for March from 56.4 the previous month, although it remained well above the long-term average. The overall market impact was limited as the focus is on employment data released later in the week and the Fed meeting next week. There is no shift in very strong expectations of a March rate hike.

EUR

The Euro was unable to make any headway against the Dollar yesterday, with resistance just above the 1.0600 level, although the main feature was very narrow ranges with no serious move to test the 1.0550 area. There was further caution ahead of tomorrow’s European Central Bank (ECB) Interest Rate Decision.

CHF

Switzerland’s foreign exchange reserves are breaking records again with an all-time high of CHF668bn ($660bn) in February, a rise of more than CHF24bn in January.

The move signals that the Swiss central bank is pushing back against the rise in the value of the Swiss Franc, which gains in times of global stress, like Brexit, political stress in the European Union and Donald Trump’s election.

Data to watch: 12.30pm UK Budget Statement. 1.15pm US ADP Employment Change. 1.30pm US Unit Labour Costs, NonFarm productivity costs Q4.

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