Poor UK retail figures
The Chancellor’s annual UK budget statement was characterised as one that stuck to the rules, with the overall package of announced tax changes being fiscally neutral over the next five years. The budget was set against a backdrop of a modest improvement to the medium term outlook for growth and employment. This year’s forecast for GDP growth was nudged up to 0.8% with the number people in work set to rise by one million by 2016. The profile for government debt was also slightly improved since last year’s Autumn Statement with £11bn less projected borrowing and the debt burden expected to peak at 76.3% of GDP in 2014-15.
The Bank of England minutes from the March policy meeting revealed that the MPC voted 7-2 to maintain its asset purchase programme at £325bn. Two members saw an immediate need for a £25bn extension of quantitative easing to reduce the risk that persistently weak growth’ could do lasting damage to the UK economy. This should make May’s policy decision more finely balanced than the markets had previously expected – this took some of the steam out of GBP.
Meanwhile, US existing home sales dipped slightly last month but still recorded the strongest February in five years as the US housing market showed further signs of recovery. According to the National Association of Realtors, the seasonally adjusted annual rate of sales came in at 4.59 million.
UK retail figures have already disappointed this morning which has pulled GBP/USD back from 1.5850+ to 1.5750+. Eurozone purchasing figures also disappointed so this has kept GBP/EUR on an even keel but clearly leaves the dollar to benefit.
This morning Markets will pay careful attention to the US Fed’s Bernanke Speech.
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