In her address to the nation yesterday chancellor Rachel Reeves hinted strongly at across-the-board tax rises in the Budget now three weeks away, saying “we all need to do our bit” to help the UK’s dire finances.
If she does raise the basic tax rate it will be the first time that’s happened for 51 years. In a further throwback to the early 70s, it will also be exactly 51 years after Status Quo released Down Down, and that was the only direction for sterling yesterday.
GBP hit a fresh 31-month low against the euro and seven-month low against the US dollar. These are worrying times for anyone with a significant transaction coming up. Why not talk it through with your account manager and take a proactive approach? They are here to help and are at the end of the phone on 020 8003 4915.
Reeves may soften the blow of an income tax rise by matching it by an equivalent cut in national insurance. This would shift the impact from working people to higher-income pensioners, landlords and others.
Also speculation, but damaging to the pound, the markets are starting to price in a cut in interest rates from the Bank of England (BoE) tomorrow. Most still think the Monetary Policy Committee (MPC) will stick on 4% for now and await the impact of the Budget, but with inflation heading downwards and unemployment up the MPC vote will be on a knife-edge.
In a first for Smart Currency, we will be following the Budget with a live webinar the day after, analysing its impact in discussion with Your Overseas Home. This will cover not just the effect on currencies but on the wider implications for those planning to buy a property or move overseas. Watch this space for further details on signing up.
Elsewhere in the world, the US government shutdown continues to limit data coming out of the USA and is a brake on market activity.
But we are just receiving final reports on the Purchasing Managers Index (PMI) and it’s showing European business leaders in an even more positive mood than originally reported. German, Spanish and Italian PMI is around its highest for three years, with only France in the doldrums. The UK’s comes out at 9.30 and could also upset the status quo.
