Pound (GBP) Rises as UK Reveals 2021 Budget

Published: 3 Mar at 4 PM Tags: Euro, Dollar, Pound Sterling, America, UK, Eurozone, Australian Dollar, New Zealand Dollar, Australia, New Zealand, USA, China, Germany,

Pound (GBP)

The Pound rose today following Chancellor Rishi Sunak’s announcement of the 2021 Budget. Sunak confirmed the extension of the furlough scheme until September.

Today also saw news that the Office for Budget Responsibility (OBR) now expects the UK economy to grow by 4% this year owing to a ‘swifter and more sustained recovery’ than expected in November last year.

Consequently, GBP investors have become more confident about the UK economy going forward.

In UK economic data, today saw the release of the latest Services PMI for February, which fell below forecasts to 49.5.

Analysts at Markit were more optimistic about the data, however, saying:

‘A degree of stability returned to the UK service sector after the sharp downturn in output at the start of 2021. Restrictions on travel, leisure and hospitality due to the national lockdown continued to curtail overall activity, but there were some pockets of growth in technology and business services.’

Euro (EUR)

The Euro struggled today following this morning’s publication of the Eurozone Markit PMI Composite for February. The figure remained in contraction territory at 48.8, sparking concerns for the Eurozone’s economic performance in the months ahead.

Christ Williamson, the Chief Business Economist at the IHS, was downbeat in his commentary, saying that this presents the ‘fourth successive monthly drop in business activity [and] puts the Eurozone economy on course for a double-dip recession’.

However, EUR traders are remaining cautious now that Germany’s lockdown has been extended until late March.

US Dollar (USD)

The US Dollar has suffered from improving risk sentiment this week with US President Joe Biden’s largest Covid-19 stimulus package expected to successfully pass through the Senate this week.

Consequently, demand for the safe-haven currency has eased-off on growing confidence that the world’s largest economy could be on the road to recovery.

In US economic news today saw the release of the latest ADP Employment Change figure for February, which fell below forecasts to 117 thousand.

Nela Richardson, chief economist, ADP, commented on the data:

‘We’re seeing large-sized companies increasingly feeling the effects of COVID-19, while job growth in the goods-producing sector pauses. With the pandemic still in the driver’s seat, the service sector remains well below its pre-pandemic levels; however, this sector is one that will likely benefit the most over time with reopenings and increased consumer confidence.’

Australian Dollar (AUD)

The Australian Dollar rose today because of a stronger-than-expected GDP figure for the fourth quarter of last year. The figure rose above forecasts by 3.1%. quarter-on-quarter.

Additionally, the risk-sensitive AUD has benefited from improving risk sentiment.

New Zealand Dollar (NZD)

The New Zealand Dollar is muted today following weaker-than-expected Chinese PMI data.

With China being New Zealand’s largest trading partner, NZD investors are now becoming more concerned about the outlook for New Zealand’s economy.

As of Wednesday, 3rd March 2021, the Pound Sterling currency rates mentioned within this news item were as follows:

GBP EUR exchange rate was 1.1557, GBP USD exchange rate was 1.3927, GBP AUD exchange rate was 1.7946, GBP NZD exchange rate was 1.9256, and GBP CNY exchange rate was 9.0077.

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