UK Budget 2024: live Updates as Chancellor Reeves Announces Plans
Theโฃ UK is awaiting Chancellor Rachel โขReeves’โค budgetโค announcement today, with meaningful attention focused โฃon the government’s plan to address a ample fiscal challenge and stabilize the economy.
The fiscal Picture
According to analysis,โ this budget is unique in recent history due to a clear understanding of both its starting point and intended endpoint. The budget โbegins with a ยฃ20 billion โฃfiscal hole and aims to conclude with the Chancellor increasing โขfiscal headroom to between ยฃ15-20 billion – โขpotentially โขdoubling the current โขlevel. The key question is how Reeves intends to bridge this gap.
Analysts anticipate a “smorgasbord of tax raising measures” will be unveiled as part of the budget. While not expected to beโฃ as dramatic as the previous year’s budget,it โขis predicted to be the third largest tax-raising budget in the post-war period.
Pound Sterling Under Scrutiny
The British pound has โคbeen volatile, recentlyโค plunging to a record low in Asia following โคthe government’s announcement of tax cuts and investment โคincentives.โ Markets are closely monitoring the currency’s strength today, viewing it as a real-time indicator of investor reaction to โReeves’ plans.
Asโ of Wednesday morning, the pound was up 0.18% againstโ the dollar.
Alpine Macro’s Chief Global Fixed โขIncomeโ and Currency Strategist Harvinder Kalirai suggestsโฃ sterling faces a difficult situation. “If Chancellor Reeves tightens fiscal policy, it will open the door for more easing by the [Bank of England]. Tight fiscal/easy monetary policy is a classicโ mix for a weaker currency,”โ he stated. Conversely, aโ cautious approach from Reeves could raise concerns about โUK deficitsโข and debt, also weighing on the pound.
Daniel tobon, head of G10 FX strategy at Citi, notes that leveraged investors hold short positions on โขthe pound tied to the budget event. He observes that despite negative news regarding the budget and weaker UK data, the pound has โnot considerably declined in recent weeks, โฃsuggesting existing short positions may already be priced in.
Citi had targeted 0.88 for EURGBP leading up to the budget,a target thatโค has been met,but further gains have been limited. Tobon suggests a risk of a “position squeeze” – anโ unwinding of short GBP positions – and believes some investors mayโข already be reversing these trades as gilt yields have stabilized.
