Sterling Clings To Three-Week Highs Ahead Of British Budget Plan

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Sterling was steady at $1.2545 GBP=D3 and at 89.96 pence against the euro EURGBP=D3 on Wednesday, a day after hitting three-week highs against both currencies, ahead of expected British moves to prevent a full-blown unemployment crisis.

In his new budget speech, due at 1130 GMT, British finance minister Rishi Sunak is expected to include a 2 billion-pound fund to create six-month work placement jobs for unemployed 16-24 year-olds.

Sunak is also expected to cut property purchase taxes which could jump-start the housing market and to allocate 3 billion pounds to improve the energy efficiency of homes which would support more than 100,000 jobs.

Jordan Rochester, Nomura’s forex strategist, said only fundamental growth enhancing reforms, such as the change to Stamp Duty on property, might have an impact on the British currency, given that forex investors are in a growth mindset.

“It’s an event worth watching out for but not clear if it’s a fundamental game change for the direction of the currency,” Rochester said of the likely impact on the pound, with the market also focused on renewed Brexit talks this week.

British and European Union negotiators kicked off the talks on Tuesday, with the top EU official saying he wants a deal, “but not at any price”.

Last week’s talks were cut short with both sides saying they had yet to overcome the gulf in positions that could see Britain leaving a status-quo transition period at the end of this year without a trade deal.

Britain is prepared to leave the EU on the same terms as Australia has with the bloc if it cannot agree on a future trading deal, Prime Minister Boris Johnson told Germany’s Angela Merkel in a telephone call on Tuesday.

– Reuters.

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