Today brings the delayed UK autumn budget, with tax policy and spending cuts front and centre of expected policy- it’s just a matter of how much and how severe.
With the Office for Budget Responsibility forecasting an excess of £70bn to the government’s borrowing budget, chancellor Jeremy Hunt’s acknowledged that "we are going to see everyone paying more tax” in a BBC interview, but the government is also wary of hobbling business investment at the risk of stagflation.
Not to mention adding more pain to the cost-of-living crisis would be both unreasonable and a political own goal.
Yet it comes at a time when 10-year gilt yields just fell to their lowest level in two months while Cable has been making solid gains, indicating at least some optimism in the UK’s economic prospects.
Despite the pair cutting back 20 pips this morning, GBP/USD still holds strong at US$1.189.
GBP/USD awaits chancellor Hunt’s autumn statement – Source: capital.com
EUR/GBP has been rangebound for the past two weeks and this morning was no different. The pair hit a high of 87.3p this morning before cutting back to 87.15p.
Euro area inflation data is due this morning, with forecasts pointing to a record high of 10.7% year on year.
Against that backdrop, EUR/USD is in an indecisive mood, with the pair cutting back to US$1.036 before inching higher to US$1.039 during this morning's Asia trading session.