The ‘Budget’ is when Britain’s government sets out its annual tax and spending plans for the year. For currencies, it can be explosive – see September 2022 and GBP/USD hitting an all-time low.
Last week’s Budget was not one of those occasions. But financial decisions can often be delayed until it’s over and property markets slow down, so it’s good that it has passed. It produced a relatively muted market reaction: government borrowing costs eased and sterling hit its strongest against the euro for 18 months – one of the few periods when it has touched €1.20 since the referendum.
The Budget was more notable for what it didn’t contain. No ‘exit tax’ (just when Italy is planning one) and no extension of the mansion tax. However, there was more tax on UK landlords – could that sway buyers towards an overseas purchase instead?
Getting through Budget Day does not remove currency risk. Thursday’s Bank of England decision, stubborn inflation, energy prices and events overseas could all move sterling before Christmas.
If a client knows they will need currency in the coming weeks, now is the time to start discussing what level of risk they are comfortable taking.
