The Chancellor delivered his budget speech this afternoon to the House of Commons. The event, as expected, received little market fall out as investors largely disregarded the spending promises given the political tumult caused by Brexit. Nevertheless, the news was positive: upgraded growth forecasts from the Office for Budget Responsibility; higher spending across the board; significant movements in taxation thresholds; and new treasury revenue streams. Despite the largely positive announcements backing up May’s Conservative Party Conference pledge to end the decade long commitment to fiscal austerity, Sterling failed to catch a bid, dropping through 1.28 against the Dollar mid-speech. In Germany this morning, a surprise announcement that Chancellor Merkel will step down as CDU leader caused a strong and sudden sell-off in the Euro. Adding to extant political risk within the Eurozone, Merkel also announced that her time in front-line politics is over when her present term in the Bundestag ends in 2021. Given that Merkel’s four term-strong Chancellorship has been a flagship of stability for the Eurozone’s most significant economy, the news was met with a considerable uptick in net short positions against the European single currency. However, as markets came to learn that Merkel intended to see out her term, only relinquishing the premiership of her Christian Democratic Union and not the Chancellorship of Germany, the Euro did gain some footing to re-test 1.14 against the Dollar. With mid-term elections in the US taking place next week, the Dollar managed to add to its already elevated value, trading more than 0.5% stronger on the day. Core personal consumption expenditure in the US was read today for the month of September, coming in perfectly in line with consensus forecasts, at 2%, equal to last month’s reading. The Dollar had been under pressure over the weekend as a combination of stock market jitters and Trump’s condemnation of the Fed’s tightening cycle led traders to begin pricing out the probability of a December rate hike late in Friday’s evening session. However, by avoiding the scathing criticism of Brexit and the crisis in Italy, the greenback secured good demand as its domestic interest rate expectations were restored.
Discussion and Analysis by Charles Porter
Click Here to Subscribe to the SGM-FX Newsletter
Related Insights
Daily Brief – Chancellor Reeves
Humphrey Percy
Wed 5 Nov 2025
Chancellor Reeves Market observers were no better informed at the end of the Rachel Reeves speech than they were at the outset yesterday morning. The only surprise was that having comprehensively floated options in the past two months for inclusion in her November 26 Autumn Statement, that the Chancellor should have elected to speak at […]
Daily Brief – Eurozone Growth
Humphrey Percy
Wed 17 Dec 2025
Eurozone Growth Those productive Germans have for the second month been less productive it turns out in December which was a surprise to the pointy heads deputed to monitor EU stats. The story is as follows: the German services sector remains relatively resilient but manufacturing output has declined. At present the French economy is doing the […]
Daily Brief – USA and the UK: 2 different tales
Humphrey Percy
Wed 24 Dec 2025
USA and the UK: 2 different tales Last week hedge fund tyro and super successful business builder Ken Griffin of Citadel gave a powerful interview on Bloomberg TV. One of his well-made points was that Europe needs to become more businesslike and encourage and applaud business. We took a look at the Top 50 World Companies: […]
