Phillip Hammond today delivered his first Spring Statement in parliament, and he was cheered on by the Sterling as he announced that growth for the UK in 2018 would likely jump to 1.5% in 2018 from the 1.3% expected and the 1.3% for 2017. The Chancellor told us that the UK was at an economic turning point with better debt readings and growth forecasts. However, for 1.5% instead of 1.3% growth is not too much to get excited about, especially with the UK looking over the precipice that is Brexit.
Trump stole his thunder! As the chancellor was speaking the news broke that US Secretary of State Rex Tillerson had been sacked and replaced with former CIA Director Mike Pompeo. The move shows that not only is it America first, but his protectionism runs deeper, and we must ask is the timing of this important, after Tillerson’s comments on the Salisbury Spy attack.
GBPUSD moved higher and adding both the Chancellor’s performance and Tillerson’s sacking to the mix we have seen some very strong gains with cable up trading through the key upside trendline I had highlighted on my twitter feed this morning. This was initially a pound move however is soon became much more apparent that the downside on the US dollar was having much more of an effect, with EURUSD, USDJPY and Gold prices all posting similar moves.
Lets focus on the UK, and the Chancellors big moment for just a second, and why did we see the market take his statement without any scepticism after all Brexit could derail all of these plans. So calling an upward revision to GDP is a bit of a stab in the dark. What did the chancellor tell us:
They were probably the main headlines that really drove the markets, and there was next to no mention of the “B” word! Although there was an estimate on the Brexit financial settlement, with the government believing it to come in at around GBP37BN. However, despite not really touching on the subject, the uncertainty that Brexit creates cannot be overlooked. We know that the Brexit factor is already having an effect on productivity and there is no way the chancellor can rule out BVrexit totally changing his numbers at any given point. For me that’s why the markets decided the US dollar/Tillerson story was the one to get their teeth into.
As mentioned earlier, the Tillerson issue is not maybe a surprise, we are already looking at the highest turnover of staff in a White House for decades. However is the willingness to fire high ranking officials and politicians if they don’t toe the party (Trump’s) line. The sacking of Rex Tillerson as Secretary of State comes just a matter of weeks after Gary Cohn, the President’s high ranking economic advisor left his post. The market has shown far more resilience over this time over, probably because this is the same old story when it comes to the Trump administration.
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Investors continue to grapple with inflation concerns; Surprise API oil build comes at a critical juncture; Even the hard-to-love EUR is trading higher