Budget gives the pound a boost
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Budget gives the pound a boost
2 minute readThe pound has been making gains after Chancellor Rishi Sunak announced a public spending programme that he presented as the largest fiscal boost to the UK in 30 years. This comes in addition to this morning’s rate cut which the Bank of England estimates to be equal to around 1% of GDP.
The Chancellor’s plans included increased spending in public services and infrastructure as well as support for businesses and emergency measures to address the threat of the coronavirus. Sterling made gains against the euro and the US dollar following the budget speech. The ECB statement on the epidemic is expected tomorrow at the conclusion of the two-day meeting and US plans to address the matter have faltered due to a lack of cross-party agreement on the best approach.
As a result, sterling has recovered from today's initial dip as the Bank of England responded to the growing threat of coronavirus on the economy by cutting interest rates to 0.25% - their lowest level in history and the first cut since 2016.
Reducing rates from 0.75%, the BoE has said it will also free up billions of pounds, approximately £190bn to help support businesses in efforts to bolster the economy. Governor Mark Carney has said the decision is due to coronavirus ‘economic shock’ and the impact on the economy “could be large and sharp, but should be temporary.” He added that economic activity will likely weaken in the coming months.
While the BoE didn’t buy additional bonds through the measures of Quantitative Easing, it hasn’t been ruled out as firepower in the coming months.
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