Pound to Euro and Dollar exchange rates halted their gradual slide over the past week as the afternoon commenced yesterday, with the surprise result in the House of Lords arguing that it should be guaranteed Parliament should get a final vote on any Brexit deal reached, and with the Budget to be released today at 12:30.
Why was there more confidence in the Pound?
First off, Chancellor Philip Hammond has been painting a very positive tone for this budget for weeks. The aim is to prepare Britain for a ‘new chapter’ in its history after Brexit. As such, depending on the policy choices, markets may respond very well to his attempts to insulate the UK economy from any adverse Brexit effects.
Skills orientated policies funding apprenticeships to increase job growth, large infrastructure projects, and additional assistance for the North Sea oil and gas industry to name but a few features are traditionally positive elements which currency investors look for. Pound to Euro and Dollar rates should benefit later today.
Secondly, the challenge from the House of Lords to the current wording of the Brexit Bill targets a particular part of the Brexit process which has helped the Pound heavily in the post.
The argument goes that if Parliament is involved in voting on any eventual deal reached with the European Union, a more sensible deal for all sides will be reached. Furthermore, this means that Parliament will be continually consulted on the state of the Brexit talks, meaning that markets will not be largely left in the dark over the next two years.
All of the above lends to greater confidence in the Pound, but with so much policy to be decided in a single day, there will also be opportunity for significant changes to long-term forecasts surrounding the Pound.
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