- Pound (GBP) rises post budget
- Supportive measures boost GBP
- Euro (EUR) under pressure despite upbeat PMI data
- Eurozone retail sales in focus
The Pound Euro (GBP/EUR) exchange rate is extending gains for a second straight session. The pair settled +0.2% higher on Wednesday at €1.1563 after hitting a high of €1.16 earlier in the session. At 05:15 UTC, GBP/EUR trades +0.1% at €1.1575.
The Pound rose following a supportive Spring Budget from the Chancellor Rishi Sunak. The Chancellor delivered what he hopes will be the last big spending budget to see the UK economy through the covid 19 crisis after the economy collapse 10% last year.
On a positive note the UK economy is expected to return to its pre-pandemic size earlier than expected at expected by mid-next year. The unemployment rate is expected to peak at 6.5%, lower than the initially feared 7.5% thanks to the continued furlough scheme and the rapid rollout of the vaccination programme.
As expected, the furlough scheme was extended from April to September, the British high street received a boost through a extended VAT cut and and the stamp duty holiday has been continued.
However, Rishi Sunak also warned that action would need to be taken going forwards to attempt to plug the huge hole in public finances.
The Chancellor announced that the UK will increase corporation tax from 19% to 25% in 2023. This will mark the first rise in corporation tax since 1974.
Demand for the Euro was softer across the board in the previous session despite better than forecast PMI data. IHS / Markit February composite PMI rose to 48.8 up from 47.8 and above the flash reading of 47.8. A reading of 50 separates expansion from contraction.
The growth was primarily down to almost record growth in manufacturing factories which have remained open through the covid restrictions.
The Eurozone economy is on track for a double dip recession but there are strong signs that optimism is improving.
Eurozone retail sales will be in focus today. Analysts are expecting sales to decline 1.1% month on month in January, down from a 2% increase in December.