Budget 2010: Insight expects sterling to remain weak

As the Budget has come in largely as anticipated, Thomas expects to see no sharp move in broad sterling valuations.

However, the manager says spending cuts will reduce demand in the economy and allow interest rates to remain lower than they would under the previous administrations plans.

"The positive aspect is that action taken to reduce the deficit via spending cuts not increased taxation should lead to a higher potential growth rate and a lower risk of a fiscal/sterling crisis," Thomas says.

"However, there is a lot of policy credibility in the GBP price already. All sterling's gains against the euro since the start of the year are as a result of shift in relative perceptions of fiscal and economic vulnerability and not because of expected changes in relative monetary policy.

"In summary, the Budget is as expected. The path of lower interest rates (sterling negative) and improved fiscal stability (GBP positive) is already in the price. Sterling unlikely to see much independent move as a result."

 

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• Topics
• Economics / Markets
• sterling
• currency
• Insight Investment