Daily Brief – Office of Budget Responsibility

Office of Budget Responsibility

If matters were not already murky enough, it now transpires that the unscheduled release of forecast on Budget Day was not a first for the OBR. Not really much of a story now that the previous Head of the OBR has done the honourable thing and fallen on his sword. But what is potentially much more revelatory is the pressure to which Richard Hughes had been subjected to reflect Chancellor Reeves’ pro growth initiatives in the OBR forecasts. Since we along with many market watchers suspected, those pro-growth initiatives do not add up to much at all, the OBR declined to include them because they added up to moving the economic growth dial by less than 0.1%. And that is rather more the story than Rachel Reeves’ challenge in replacing Richard Hughes with someone sufficiently independent of thought and therefore acceptable to markets. Much as Chancellor Reeves claims she is stimulating growth in the UK economy there is little evidence to support that claim.

EUR/USD 1.1605.

New Zealand

With all the chatter about the hard pressed Henry’s and Henrietta’s i.e. those who are High Earners but Not Rich Yet, maybe the answer lies at the other end of the world. The new NZ Business Investor Work Visa launched last week allows those with NZD 1 million to invest which is less than GBP 500K an opportunity to re-locate to NZ and within 3 years to become eligible for permanent residency. Those with NZD 2 million or less than GBP 1 million can achieve the same after just 1 year. Some other conditions which are reasonably easily met by those Henry’s and Henrietta’s around their ability to support themselves and their families. The scheme will certainly appeal to many and will doubtless lure many more away from the UK.

GBP/USD 1.3195.

FX Hedging

As we regularly discuss with our clients there are 3 FX hedging choices open to them: Fully hedged, partially hedged or unhedged. As night follows day when fund managers start losing money on FX they move en masse to hedge. 2025 has been a year where fund managers have lost money on FX and as a result a report based on data from 250 asset management companies released this week states that almost half of all UK fund managers plan on either partial or full hedges in 2026. So, what has driven them to this? Increased volatility of course, but rather more the events of the past 3 months with Chancellor Reeves introducing a full menu of ideas only to withdraw most of them. So it’s the uncertainty as much as the volatility which is making it harder for UK fund managers to read the FX tea leaves under the present UK government.

EUR/GBP 0.8795.

EU Bond Yields

EU inflation is ticking along at 2.1% which is entirely respectable and is not forecast to rise, so why are EUR bond yields climbing? Tempting though it is to level the blame at the feet of Germany and France and their less than stellar political primates, the cause of those rising bond yields is far to the East of the EU-in fact in Japan. Due to Japanese government bond yields being on a 19 year high, this has prompted a re-pricing of all Government markets. 

EUR/JPY 181.05.

Don’t It Make My Brown Eyes Blue

This day in 1977 Crystal Gayle knocked out Debbie Boone and You Light Up My Life to take the Number 1 spot in the charts. Crystal Gayle was wont to claim that the song’s composer Richard Leigh had taken inspiration from his dog which had one blue and one brown eye. That turned out to be no more than a shaggy dog story when RL denied it in an interview years later.

Don’t know when I’ve been so blue
Don’t know what’s come over you
You’ve found someone new
And don’t it make my brown eyes blue

I’ll be fine when you’re gone
I’ll just cry all night long
Say it is all true?
And don’t it make my brown eyes blue!?

Tell me no secrets, tell me some lies
Give me no reasons, give me alibis
Tell me you love me and don’t let me cry
Say anything, but don’t say goodbye

I didn’t mean to treat you bad
Didn’t know just what I had
But honey now I do
And don’t it make my brown eyes
Don’t it make my brown eyes
Don’t it make my brown eyes blue

Discussion and Analysis by Humphrey Percy, Chairman and Founder

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