The pound weakened yesterday as initial excitement about the new Chancellor’s upcoming Budget waned. However, it is stronger against the dollar this morning.
When the new Chancellor was announced at the beginning of this month, sterling strengthened on hopes that the Budget in March would include plans for increased fiscal spending, boosting the economy. There was also speculation that Rishi Sunak would re-write Britain’s fiscal rules to increase spending further.
However, The Institute of Fiscal Studies warned yesterday that Sunak should make clear that an increase in taxes would be needed to achieve his targets, and that rewriting or loosening the rules would undermine the credibility of these targets. Coronavirus fears have also cast doubt over whether Sunak will announce a strong fiscal package, which increases expectations of another rate cut later this year.
The government are expected to release their negotiating mandate for UK-EU trade talks later today.
