Cost of living and energy crisis help announced

GBP

The pound held steady against the euro yesterday after the British Chancellor Rishi Sunak said that inflation was causing a high level of stress to the British public. To ease the cost of living and energy crisis, Mr Sunak announced a raft of measures to combat the spiralling cost of energy bills with a windfall tax on oil and gas companies. This will be used in conjunction with a £25billon support package to help families and those struggling with energy bills across the country.

The move from the Chancellor will give every household in the UK a £400.00 discount on their energy bills and more for the lowest income households and marks a U- turn from the Government that had previously resisted a windfall tax as they suggested it was to the deterrent of investment. Sunak acknowledged that the measures would likely boost inflation but that he believes the additional impulse was manageable. The hope is that the measures will increase UK consumer confidence and in turn that UK data could move to the upside and support future interest rate hikes from the Bank of England. This could give the pound some much needed support as it been under pressure due to concerns that the UK could be tipped into recession.

The party gate scandal also still in focus appears to be holding back demand for the pound as Prime Minster Johnson continues to come under pressure to resign. Although the Prime Minster has apologised he still does not appear too close to stepping down which may continue to weigh on the pound.

EUR

The euro pushed higher against the USD yesterday after more hawkish comments by ECB policy maker Klaas Knot said that a 50 basis point rate hike was on the table soon, which follows comments made by the ECB president Christine Largarde earlier in the week. She said that the ECB should be able to lift interest rates out of negative territory by the end of September as they look to combat rising inflation in the Eurozone. With no European data of any note today the focus is likely to be on ECB member Lane who speaks later today. The only European data will be Spanish retail sales which are expected to show a fall in March.

Key announcements

12.35 – FOMC Member Bullard Speaks 12.35 pm 13:30 – US Core price index 15:00 – US consumer sentiment