Britain slashed its economic growth forecasts and expects to borrow a lot more going into the next decade, chancellor Philip Hammond said, but he nonetheless plans to spend more in the next couple of years to offset the impact of Brexit.
Traders said they had expected the Office for Budget Responsibility (OBR) to lower its forecasts as the Bank of England did this month, but were disappointed by the lack of significant new fiscal stimulus measures to make up the gap.
The OBR’s projections for 1.5 percent growth in 2017 were down from forecasts of 2.0 percent made in March. For 2018, forecasters see 1.4 percent growth, and for 2019 and 2020 growth of just 1.3 percent - a sharp downward revision from the 1.7 and 1.9 percent respectively seen in March.
The dollar retraced having tumbled after the minutes of the Federal Reserve’s latest meeting showed some policymakers were concerned about persistently low inflation in a blow to rate hawks.
The minutes of the Fed’s Oct.31-Nov.1 policy meeting released on Wednesday showed that Fed policymakers expect that interest rates will have to be raised in the “near term”, reinforcing market expectations of a December rate hike. The minutes, however, also highlighted concern among some of the members over the inflation outlook, with the emphasis placed on economic data in determining the timing of future rate rises.
New orders for U.S.-made capital goods unexpectedly fell in October after three straight months of strong gains and a measure of goods orders that strips out volatile components had its biggest drop since September 2016.
The University of Michigan’s consumer sentiment report showed a decline in expectations for long-term inflation.
Analysts said the low volume in markets ahead of the Thanksgiving holiday in the United States on Thursday was exaggerating moves.
09.30 – GBP: Second Estimate GDP QoQ; Forecast same as previous at 0.4%