Pound unconcerned over OBR downgrade

Fiona Cincotta
By :  ,  Senior Market Analyst

It’s hardly surprising that Brexit is overshadowing the Spring Statement this year. The pound rallied across the session in the wake of Theresa May’s defeat and as Parliament prepares to reject a no deal Brexit later today. Not even the OBR could rain on the pound’s parade today.

Growth Forecasts Lowered
The OBR confirmed that the immediate prospects for the economy are poor and this was well known heading into the Spring Statement. Q4 GDP was a lacklustre 0.2%, so the fact the GDP forecasts for 2019 has been revised lower to 1.2%, down from 1.6% is nothing new for the markets to chew on.  This explains why the pound shrugged off the forecasts and Hammond pressed forwards quickly. 

Borrowing is down, high tax receipts, wages are up, and job creation is strong. According to Hammond the economy is remarkably robust despite the Brexit cloud hanging over it. There was plenty for the markets to like, including a “deal dividend” should the UK agree a Brexit deal with the EU. However, it is also fair to say that the Spring Statement will barely register as Brexit uncertainty hangs over businesses and the pound remains focused on the remaining votes in Parliament this week. Not even Hammonds warnings over a no deal Brexit hitting the economy could take the wind out of the sales of the pound.

No Deal Brexit Vote
Brexit optimism is pushing the pound towards $1.32, up a staggering 100 points, not bad given the future of the UK looks so uncertainty. Whilst traders are focused on the upcoming vote, it is also worth pointing out that tonight’s vote is not legally binding. Whilst Parliament may express a wish not to leave the EU in a disorderly fashion, that doesn’t mean it won’t happen. At these levels the pound continues to look on the optimistic side, disbelieving that the UK could crash out of the EU in just two weeks.

The stronger pound ensured the FTSE lagged behind its European counterparts. Whilst it was in positive territory, up 0.1%, this was behind the Dax which traded 0.2% higher. Wall Street was also on the front foot, including the Dow as Boeing finally turned a corner. 

Boeing moves tentatively higher
Boeing shed 13% across the past week as country after country grounded the MAX 8 737 plane amid growing concerns over the safety of the plane. The Federal Aviation Association (FAA) saying they found no issues with the plane has helped restore a grain of confidence back in Boeing enabling its share price to move tentatively higher.

Related tags: Forex Brexit GBP

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