It’s a potentially significant week for UK markets. Analysts at ING assess the outlook for Pound Sterling (GBP) in anticipation of the Spring Budget.
UK budget is a key event risk for Sterling
Expectations of implementing pre-election tax cuts may face challenges due to funding constraints. Although we estimate that the available headroom has risen from £13bn to £18bn, courtesy of marginally lower market rates compared to November’s Autumn Statement.
Reports from UK media suggest that Hunt is likely reducing the magnitude of the tax relief package, and the support measures are expected to be less substantial compared to those implemented in November.
A tax relief package of moderate size, one that avoids triggering gilts turmoil, may provide some support to GBP this week. However, it’s essential to acknowledge that the range of potential outcomes is quite extensive.