GBP/USD: Pound Bolstered by Confirmed March 11 Budget

The British pound is up against the US dollar on Tuesday afternoon on confirmation that the UK budget will take place as planned on March 11 despite the shock change of Chancellor last week.

Losses in the dollar were limited by demand for haven assets after Apple, the largest company in the world by market capitalisation warned it would miss sales targets because of the coronavirus.

GBP/USD was higher by 31 pips (+0.20%) at 1.3027 with a daily price range of 1.297 to 1.305 as of 2.30pm GMT. The currency pair rallied back through the key 1.30 handle to limit weekly losses to -0.18%.

The pound started the day on the backfoot

Data showed wage growth for December came in a little softer than expected at 2.9% instead of the 3% economists had forecast. Wage growth is a key driver for inflation, which the Bank of England targets when setting interest rates. Other data for the UK labour market was more positive. The change in the number of people claiming unemployment, the ‘claimant count’ rose by 5,500 when a bigger rise to 22,600 had been expected, while the unemployment rate held steady at 3.8% as expected.

Sentiment towards Sterling turned more positive in the afternoon when new Chancellor Rishi Sunak announced the UK budget would go ahead as planned on March 11. There had been rumours it would be delayed while Sunak found his feet at the Treasury following his appointment on Friday.

The dollar

The US dollar was edging higher again by the afternoon after more positive sentiment data for the manufacturing sector. The NY Empire State Manufacturing index saw a surprise jump to 12.9 when a more lacklustre rise to 5 from 4.8 had been forecast. The improvement in US manufacturing stands in stark contract to the faltering data out of Germany.

Besides housing data released later, the next datapoint on the agenda for dollar-traders are the  FOMC minutes, scheduled for release tomorrow afternoon. Comments on the economy might be a little stale but any discussion of the policy review will be important, particularly as it related to the Fed’s 2% inflation target.

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