GBP/USD: Brexit Nerves Hit the Pound versus Dollar Ahead of Tuesday's Parliamentary Vote

The Pound has moved off session highs but remains comfortably over $1.29 following the Chancellor’s Budget and an earlier 50 basis point interest rate cut by the Bank of England.

At 14:00 UTC GBP/USD is trading +0.3% higher at US$1.2950, towards the upper end of the daily range US$1.2846- US$1.2977.

Pound Steady Post Budget

Following on from the Bank of England’s deep interest rate cut earlier today, the Chancellor announced large scale fiscal stimulus to support the UK economy through the coronavirus outbreak and beyond.  He unveiled a stimulus package to the tune of £30 billion, bringing years of austerity to an end. This budget tots up to £175 billion in spending over the next 5 years.

Going into the budget one of the main concerns was what the Government intended to do to support small and medium sized businesses through the supply / demand shock of coronavirus. There was many measures in this very bold Budget to calm nerves. However, the amount that the government is looking to borrow has also increased dramatically, taking borrowing to the highest level in 30 years. Whilst fiscal stimulus often boosts a currency, high debt levels can unnerve investors.

To say it has been a busy day for Pound investors would be an understatement. With no high impacting economic releases due tomorrow, investors will be hoping for a calmer day.

US Dollar Shrugs Off CPI

The US dollar remains under pressure on Wednesday as investors shrug off better than forecast inflation numbers as they await further information on a US fiscal stimulus package.

US inflation, as measured by consumer price index increased by 2.3% year on year in February. This was ahead of the 2.2% that analysts had estimated, but below 2.5% recorded in January. However, the data refers to a period before the coronavirus spread started to accelerate and before the oil price tanked to $30. As a result, investors have vied the figures as out of date.

There is still no news on a stimulus package in the US. After Trump’s announcement on Monday the White House has remined silent, unnerving investors, particularly as the number of coronavirus cases keep growing.