Hammond’s first budget has little effect on rates
Philip Hammond’s first budget although upbeat has done little to change the Pounds recent weakness on the currency markets. The big factor still holding the Pound back is the triggering of Article 50 at the end of this month, this coupled with the government’s recent defeats on the Brexit process in the House of Lords has left Pound sterling at a 13 week low.
Even with revised growth of the UK economy showing a positive improvement from 1.4% to 1.6% the impact to the pound was minimal. The speech itself was upbeat, but showed Mr Hammond is pulling the drawstrings tight on the treasury to build some cash in the treasury to help thwart any major shocks caused by the UK leaving the EU.
Highlights of the budget included a £2 billion pound injection into the adult social care system over 3 years but critics say this falls far short of what’s needed adding that £2 billion a year at a minimum is needed to keep the system running at the level it was a few years ago. With an ever aging population and higher demands in disability care this could come back to haunt the chancellor down the line.
Other points of note included the raising of National Insurance tax for the self-employed and a taxation on dividends starting at the first £2000 instead of the original £5000 the government had promised a few months ago.
Across the pond US President Donald Trump continues to cause controversy after claiming former President Barrack Obama wire tapped Trump tower in the elections last year. Whilst there seems to be little evidence of this, it is dominating the media in America. President Trump also signed a new executive order to circumvent the one blocked by the Supreme Court earlier this year banning travel from 7 mainly Muslim majority countries.
I believe we are likely to see US Dollar weakness as the President continues to try and enact his policies and runs into further opposition over the next few months.
As for the Pound, the picture isn’t a positive one. I believe in the short term at least further weakness is likely making the current rates attractive if you are traveling before June.
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