GBP demonstrated relative stability during the midweek announcement of the Spring Budget, disappointing those hoping for a stronger currency but providing relief to those who recall the aftermath of the Liz Truss budget collapse.
Truss's legacy highlights the high cost of unfunded stimulus, prompting her successors to prioritize maintaining UK fiscal credibility. This commitment is seen as a foundation for potential longer-term advancements in the Pound.
The budget, slated to stimulate the economy, reveals a net fiscal policy loosening of £13.9BN (0.5% of GDP) for the 2024-25 financial year. The Office for Budget Responsibility's optimistic projections for UK growth and anticipated improvements in disposable incomes contribute positively to the Pound's outlook. However, the government's announcements are not expected to have a substantial impact on the Bank of England. In the short term, Pound-Euro remains within a narrow range, albeit with a slightly bearish momentum that could test support at 1.1658 soon.
The ECB event today introduces the possibility of volatility in EUR exchange rates. Although no rate changes are anticipated, the market eagerly awaits any hints regarding potential future cuts. The ECB will likely maintain guidance, acknowledging improved inflation trends but emphasizing caution before considering interest rate adjustments.
President Lagarde's press conference, known for its potential to spark excitement, requires careful communication to avoid unintended consequences. This scenario may present opportunities for advantageous transactions between buyers and sellers of euros. Nevertheless, significant movements are expected to be tempered as the established range in the chart continues to be respected.
