GBP

The British pound was lower against the US dollar by 1% after the UK government announced in its Autumn Budget the introduction of new tax hikes and spending cuts. The new measures are a mix of higher costs for households and increased support for the most vulnerable. A key objective behind the Autumn Statement is to stabilise the markets after previous government plans caused UK gilt yields to rise to forty-year highs. The current rates have now pulled back to levels prior to Truss and Kwarteng’s budget. Most measures will start to kick in next April.

One of the most impactful decisions the Chancellor announced is that the income threshold for the higher tax rate of 45% will be lowered from £150k to £125,140.

Economists warn the plans will risk to further stall the progression of an already stuttering British economy after the recent GDP data has shown a decline by 0.2% in the third quarter of the year.

Inflation continues to rise with the latest reading showing CPI at 11.1%, 1% higher than market expectation. The Office for Budget Responsibility’s forecast indicated that the UK was already in a recession and that unemployment will jump from 3.5% to 4.9% in 2023.

The Bank of England’s outlook is even worse, with its unemployment forecast hitting 6.5% and negative growth expected in the second half of this year, throughout 2023 and into the first half of 2024. The BoE is set to take a dovish approach to the next monetary policy decisions, taking into consideration Chancellor Hunt’s new budget.

Key announcements

08:30 – EUR – ECB President Lagarde speaks

13:00 – GBP – BoE MPC member Mann speaks