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GBP/USD & FTSE 100 React to Latest UK Budget Announcement

GBP/USD & FTSE 100 React to Latest UK Budget Announcement

Justin McQueen, Strategist

GBP/USD, FTSE 100 Price Analysis & News

  • GBP & FTSE 100 See Muted Reaction to Budget Announcement
  • UK Budget Remains Pro-Growth

UK Budget Brief Recap

UK Labour Market: As widely expected, the UK Chancellor confirmed an extension of furlough scheme until the end of September. The Universal Credit Uplift will continue for an additional 6-months.

Business Support Measures: The Chancellor announced a super deduction to reduce tax bills if businesses invest, allowing for firms to reduce their tax bill by 130% of the cost of investment.

Taxes: Corporation tax will increase to 25% from 19% by Spring 2023. However, the UK will not be increasing income tax, national insurance or VAT.

A detailed list is on the DailyFXTeam Twitter Feed

OBR Forecasts

New Projections

  • GDP: 2021 (4%), 2022 (4%), 2023 (1.7%), 2024 (1.6%), 2025 (1.7%)
  • FY Deficit: 2020 (17%), 2021 (10.3%)

Prior Projections

  • GDP: 2021 (5.5%), 2022 (6.6%), 2023 (2.3%), 2024 (1.7%), 2025 (1.8%)
  • FY Deficit: 2020 (19%), 2021 (7.4%)

Overall, this remains a pro growth fiscal announcement with the focus on supporting the economic recovery and a look to spur investment as opposed to reigning the fiscal taps. In turn, this is likely to help undepin the Pound in the medium, which has been among the notable outperformers in 2021 thus far. In terms of the market reaction, it has been very limited given that a significant amount of the speech had been reported in UK press.

GBP/USD, FTSE 100 Chart: Reaction to UK Budget

Source: Refinitiv

GBP/USD Mixed
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 5% -6% -1%
Weekly -7% -4% -5%
What does it mean for price action?
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