UK Budget gives scant support
LONDON: Britain’s 2017 Budget has given some meagre support to domestic stock and currency markets suffering from nerves over its plans to leave the European Union and the fallout for increasingly hardpressed consumers.
While Finance Minister Philip Hammond announced a rise in official growth forecasts for this year and cut predicted rates of public debt from November estimates, it was not enough to turn either the pound or the FTSE index positive on the day.
Hampered by a bumper US jobs number that boosted the dollar, the pound fell half a percent on Budget day against the greenback, hitting a sevenweek low of $US1.2139, and another 0.2% against the euro.
‘‘Chancellor Hammond’s Budget has done little to ease the pressure on the pound, despite the improvements in growth and borrowing forecasts,’’ said Jake Trask, a currency analyst with retail broker OFX.
Strong consumer spending made Britain the secondfastest growing economy in the Group of Seven rich nations in 2016 and Mr Hammond raised his forecast for growth this year to 2% from the 1.4% predicted last November.
But markets are more concerned by signs the 20% fall in the pound and worries over what is to come as the Brexit talks that get under way this month, are finally having an impact on UK household spending.
Sterling’s fall against the dollar and the basket that measures its broader strength was its eighth in the past nine days.
‘‘There’s been some optimism over the upward revision to growth this year, and the lower budgetdeficit forecasts over the period is obviously favourable for the fundamental picture,’’ said Lee Hardman, an economist with MUFG in London. ‘‘But, overall, the main message is yes, that the budget deficit is coming in below their previous forecasts, but they’re choosing to save the improvement in the budget deficit rather than to spend those funds, so for the economy that’s fairly neutral.’’
Gilt yields hit a twoweek high after official plans showed the Government would sell more bonds than the market had expected, despite Mr Hammond largely sticking to his existing fiscal plans.
The Debt Management Office (DMO) said it intended to sell £115.1 billion of bonds in the 201718 financial year starting in April, down sharply from £146.5 billion in the current year.
That was still £5 billion more for 201718 than primary dealers polled by Reuters expected and 10year gilt yields hit a twoweek high of 1.251%.
‘‘Market reaction was consistent with a mild disappointment,’’ said RBC analysts Sam Hill and Vatsala Datta in a note after the Budget.