03/03 – UK Budget due, Furlough Scheme extended until Sept

03/03 – UK Budget due, Furlough Scheme extended until Sept

GBP: Sunak to speak at around 12.30

EUR: Pinned down

USD: Lack of concern on yields weakens USD


It’s Budget Day with the Chancellor standing at the Dispatch Box from around 12.30pm to outline his plans for government borrowing and spending, taxes and benefits through the coming years. Fiscal policy normally plays second fiddle to monetary policy for currency markets but given the huge amount of stimulus and support that economies have relied on to make their way through this pandemic, today’s speech will definitely have an effect on sterling.

A hint of what’s to come was announced last night with the government extending the furlough scheme in its full form until June and tapering to a close by September. For many however it will be the taxes that could be raised that will be the most interesting thing to watch. According to the political website Politico, 11 different potential tax rises have been speculated upon in the press in recent months; “National insurance contributions for the self-employed … National insurance employers’ contributions … Capital gains tax … Pensions tax relief … Corporation tax … Fuel duty … Alcohol duty … Windfall tax on supermarkets … Windfall tax on online companies … New property tax … Carbon tax.”

If markets get the feeling that any stimulus provided openly via the front door will simply be stealthily removed via the back door then the sterling reaction will not be positive.


Weakness in the USD overnight has been enough to rescue EURUSD from the 1.19s but the single currency will need stronger PMI figures from its collective service sectors this morning to generate further traction. In the grand scheme of things, regardless of how strong the data is, if the ECB maintains that higher bond yields may derail the economy, the euro is not able to run off that far.

US dollar

Comments from Fed Member Lael Brainerd overnight have been enough to sooth risk markets, driving the dollar weaker. Brainerd is the first Fed member to not see the recent rises in bond yields as solely a positive thing and reminded markets that it will “take some time” for the economic conditions necessary to be met for the Fed to feel comfortable in withdrawing its stimulus. The fact that it was not a concern for one of the more hawkish members of the Committee has helped the general risk atmosphere.

The overarching focus remains inflation; data today should show a spike that will be looked through by both central banks and the market as transitory given the falls in prices we were seeing this time last year.

Given this new impetus the USD could be primed for a few week days with Jerome Powell speaking tomorrow and the US jobs report on Friday afternoon.


The Japanese yen is in a tough spot at the moment. Typically in a world of rising US debt yields investors would likely be selling JPY to buy USD, weakening the yen. Some of that pressure however would be alleviated by investors also wanting to buy the yen as equities declined. At the moment though both yields and equities are moving higher, generating little reason for JPY demand.

GBPJPY could test the 150 mark this morning.

Market rates

Today’s interbank rates at 08:11 against sterling. Movement vs yesterday.

Euro€1.156 ↓
US dollar$1.397 ↓
Australian dollar$1.785 ↑
South African randR20.77 ↓
Japanese yen¥149.3 ↑

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Jeremy Thomson-Cook

Jeremy Thomson-Cook

Jeremy has over 13 years experience working in the FX industry. As a specialist in political risk mitigation and currency hedging, he regularly advises clients on the day-to-day moves of the markets and the implications of fiscal and monetary policy on international businesses.