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Sterling rallies ahead of UK Budget

GBP - British Pound

Lunchtime today sees Chancellor of the Exchequer, Rishi Sunak, unveil the UK's annual Budget, with a slew of support measures to aid the UK economy back to health set to be unveiled.

As with most Budgets many of the spending plans have already been circulated with the UK's furlough scheme set to be extended until September and extra funding being made available for the arts and hospitality sectors that have been so badly hit throughout the coronavirus pandemic. Sunak has also heeded calls to extend the £20 weekly top up to universal credit, however this is only scheduled to last six months.

Other eye-catching initiatives include extra money to support sport, assistance with first time buyers to get 95% mortgages, and a fund to help members of the public buy their local pub. As news of what to expect has been leaked to the press, sterling has pushed higher with markets welcoming the ongoing spending from Sunak. Obviously, this will all have to be repaid at some-point however we shouldn't expect much from the Chancellor re: future fiscal tightening in an effort not to rock business confidence that has taken a hammering on the back of the UK's worst annual economic downturn since 1709. GBP/USD is heading back up to 1.40 after briefly touching an intraday low of 1.3850 on Tuesday morning. GBP/EUR has also eked out some modest gains pushing up to 1.1560.

Key Movers

The frenzied dollar buying of the past few days seems to have come to a halt for now as market calm is restored after stock markets dipped on the back of rapidly rising bond yields around the world. All major stock exchanges are in the green this morning with most having recouped the losses seen at the end of last week. The commodity currencies such as the Aussie and Kiwi dollars are also making up lost ground adding to a calmer risk-on atmosphere to global markets.

The US vaccination programme appears to be pressing ahead well with President Joe Biden yesterday announcing the country will have enough coronavirus vaccine to vaccinate all adults by the end of May, two months earlier than previously forecast, as well as confirming that two of the US's largest pharmaceutical companies, Johnson and Johnson and Merck, will work together to help produce millions of jabs over the coming months.

Data wise today's big events are from America with the monthly ADP Non-Farm Employment Change numbers due at lunchtime with an extra 203k predicted to have found work in February. A little later on we have ISM Services PMI data which is expected to hold at 58.7. It’s another quiet day from the eurozone so expect the ongoing vaccination developments and lockdown rules to continue to dominate headlines on the continent.

EUR/USD is back up to 1.2080 after defending the key 1.20 level yesterday.

Expected Ranges

GBP/USD: 1.3940 - 1.41 ▲

GBP/EUR: 1.1525 - 1.1640 ▲

GBP/AUD: 1.78 - 1.7960 ▼

GBP/NZD: 1.91 - 1.9280 ▼

GBP/CAD: 1.7550 - 1.7705 ▲