The Great Britain Pound jumped against its global peers following the Spring Forecast by Phillip Hammond. The currency jumped by 0.60%, 0.50%, 0.15%, and 0.63% against the Chinese Yuan, Dollar, Euro, and Japanese Yen respectively.
In his statement today, Philip Hammond talked about many things but the most notable was his statement about the country’s GDP projections. His models showed that the GDP may continue to grow from now until 2020 after which it will start dropping by 0.1%. This year, he projected that the GDP may grow by 1.5%, which is an upward revision from 1.4%.
He also talked about the country’s debt and deficits. This year, the country will borrow £45.2 billion, which is down from £49.9 from the previous financial year. This is equivalent to 2.2% of the country’s GDP. In the next financial year, the debt to GDP ratio will fall from 86.5% to 85.1%. It will be 82.1% in 2020-21 and 78.2% in 2021-22. This trend will continue as the country cuts spending in some areas of the economy.
On productivity, Hammond promised to increase spending on some training. In this, he pledged £50 million to help employers roll out placements for T-level students and £80 million to support apprenticeships for small businesses. This is a strategy aimed to help spur productivity among the labor force as the country’s unemployment continues to fall.
The government also set aside £100 million to develop more than 250K homes through a partnership with West Midlands. In addition to this, the government will increase housing partnerships by more than £220 million. This was in a bid to increase home ownership among the citizens.
The budget reading came at a time when the country is undergoing a number of challenges. The first is on the legitimacy of Theresa May’s government. As you recall, last year, she called for a fresh election to give her more powers during the Brexit negotiations. In the election, she failed. Now, the country is in tense Brexit negotiations with the EU. UK wants a good deal that exposes it to the European markets while EU wants a tough path for the UK to prevent other EU countries from leaving.
The Bank of England has also started a path to higher interest rates. This has happened as the country’s unemployment rate has fallen leading to higher inflation. In December, the inflation jumped to 3.1% then fell to 3.0% in January and February. The BOE has pledged to continue accelerating the rate hikes. In the just concluded BOE meeting, the officials signaled faster rate hikes.
This has made the pound to regain some of its Brexit losses. This year, the currency has gained by more than 3% against the dollar, partly due to the weakness of the dollar.