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This week also saw inflation in the UK continue to fall, Consumer Price Index fell to 3.4% in February, down from 3.6%. Whilst this is still a fair way off the 2% target that the Bank of England are set, inflation has been falling steadily for a few months now and is at its lowest level since November 2010. Bringing down the inflation levels is seen as one of the key factors to boosting the economy through increased consumer spending.

The good news in the UK came to a halt this morning as the Bank of England minutes were more Dovish than hoped and revealed a 7-2 vote in March’s decision for QE. With 2 of the members already calling for a 25 Billion Pound increase, it looks more likely that new wave of QE is not too far off if the economy remains weak.

From the Budget today, George Osborne had the difficult task of treading the fine line between growth boosting measures whilst still maintaining deficit reductions plans. Ratings agencies Moody’s and Fitch will be watching the decisions closely after putting the UK on watch for a possible downgrade of their AAA status.

Key Points from the Budget

- Reduction in the top rate of tax from 50 -45p
- Continued expectation from the Government that Inflation and Unemployment will fall over the next year.
- Corporation tax to be cut by 1% this year, so from April will be down to 24%. Two further cuts by 2014 will make corporation tax lower than other competition countries and should attract businesses to locate in the UK
- Income tax threshold will be raised to £9205 from next April
- Growth Forecast for 2013 to 2.0% from previous forecast of 2.1%, forecasts increase to 2.7% in 2014 and 3% in 2015.
- Plans to double UK exports to £1 Trillion this decade

No significant reaction on any of the major currency pairs since this announcement. A lot of these measures will take months and years to have any effect so no surprise that the markets have largely ignored the data.


GBPEUR
Range of the week: 1.1947 – 1.2071
Variance of the week on £10k=€124


Still trading within a fairly tight range, pivoting the 1.20 mark this week. We saw a brief move up to a month high of 1.2071 on Monday as investors had greater confidence in the pound following a run of slightly improved economic data and a perceived lower risk of further quantitative easing in coming months. This move upwards was short and sweet and the level was back below 1.20 within 2 hours.


GBPUSD
Range of the week: 1.5821 – 1.5922
Variance of the week on £10k=$101


Quiet on the data front from the US with only new home data out so far. We saw mixed results with Building Permits up above previous months figures and higher than expected which shows a greater number of new building projects have been approved. However, the overall number of new homes built last month dropped from the previous month.

The overall positivity on the state of the US and overall worldwide economy has sent funds away from the safe haven of the US Dollar into more riskier investments, this has helped Sterling rally up towards the top end of the recent range.


GBPAUD
Range of the week: 1.4923 – 1.5160
Variance of the week on £10k= $237


The overall economy still performing broadly in line with expectations but has been showing a few signs of weakness. Weak GDP growth estimates will mean the RBA meetings over the next couple of months will be watched closely for discussions over interest rates cuts.


GBPNZD
Range of the week: 1.9143 – 1.9480
Variance of the week: on £10k=$337


No major data so far.


GBPZAR
Range of the week: 11.9430 – 12.1210
Variance of the week: on £10k=ZAR 1780


GBPCAD
Range of the week: 1.5666 – 1.5803
Variance of the week: on £10k= $137
 
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