A quick recap on yesterday’s budget, with the main takeaways being that real GDP growth for 2025 has been downgraded to 1% (notably from 2%) from initial predictions in the October budget. A contributing factor towards this downgraded growth is attributed to The Bank of England having to raise interest rates later in the year to bring inflation back down, rising energy costs and further economic uncertainty off the back of Trump’s tariffs. It should be noted that GDP does rebound back to 1.9% growth, but not until 2026.
In truth, today’s statement has been regarded as a bit of a non-event due to a lack of market reaction. But a bit of a positive for The Chancellor will be the slight easing of bond premiums. The yield for UK 30-year bonds eased by almost 0.1% to 5.283%. Similar dips were also seen in both 10-year and 2-year bonds.
The Pound has this morning recovered against both the Euro and US Dollar after US President Donald Trump weighed in again on trade tariffs, telling reporters that he will impose a 25% import tariff next week on all vehicle imports. These tariffs have been labelled as non-negotiable and has therefore given Sterling some breathing room after its post-inflation dip. This price movement seems to suggest The Pound holds a bit of a hedge-status due to the fact The UK look considerably less exposed to tariffs than The Euro-Zone.
Moving into this afternoon we have a basket of US-related releases, starting with Jobless Claims, GDP data and Personal Consumption Expenditure which currently suggest will all have shown no growth in performance in February. A lack of growth in particular for GDP and Personal Consumption Expenditure will be a concern for especially as the wave of uncertainty around Trump’s tariffs still take a grip on markets. Of course, any improvement in figures would no doubt see more volatility as The US Dollar may regain some momentum, but anything else could potentially weigh down on The Dollar and see USD currency pairs strengthen further.
Later this evening we have Inflation data excluding Food and Energy for Japan, with figures suggesting no movement from the previous release coming out at 2.2%. However, when including Food and Energy, inflation is at 3% and The Bank of Japan governor Kazou Ueda has stated interest rates must raise if food inflation continues to be a persistent problem. Japan’s inflation has been a constant problem, exceeding the central banks targets for consistently for the last three years. Japan are also another potential victim of Donald Trump’s trade tariffs, with the announcement of 25% tariffs on automobiles more than likely hitting the Japanese economy as well. This uncertainty as we’ve seen doesnt bode well from a financial market’s perspective, as well as an economic performance point of view.
GBP/EUR 1.1983 GBP/USD 1.2911 GBP/AED 4.7437
GBP/AUD 2.0481 GBP/CHF 1.1416 GBP/CAD 1.8451
GBP/NZD 2.2498 EUR/USD 1.0762 GBP/ZAR 23.5520