As George Osborne gave his statement yesterday on the state of the UK economy and future fiscal policies, the FTSE100 and GBP rose.
UK100 [FTSE100] climbed from 6714 to 6734.25 over the course of yesterday only to lose those gains.
MT4 chart: UK100
GBPUSD: Despite the strength of the dollar, sterling made slight headway from 1.5684 to 1.5717, only to fall again to 1.5673. Volatility in sterling is expected today as the market waits for the UK interest rate figures.
MT4 chart: GBPUSD
EURGBP: The euro fell against sterling slightly though this may be due to the volatility on the euro with the market anticipating the ECB meeting today and decisions on additional QE.
MT4 chart: EURGBP
GBPJPY: Sterling found a small amount of ground against the yen rising from 186.278 to 187.967.
MT4 chart: GBPJPY
Major issues such as tax revenue from banks and foreign companies, plus stamp duty were all highlighted in George Osborne’s autumn statement.
Banks will not be able to use losses made in the crisis to offset future tax, thereby raising approximately £3.5 billion in additional tax over the next five years. This is in additional to the £5 billion raised from the bank levy since its introduction in 2011. Lloyds bank, being partly state-owned will be impacted the most as it currently holds £5 billion of UK net deferred tax assets. Lloyds lost nearly 1% on shares on the news, falling from 80.87 to 79.56.
MT4 chart: Lloyds
The UK budget deficit is forecast to be 5 percent of output this year and analysts predict that this afternoon’s meeting on interest rates will see no change and the rate will stay at 0.5%. Osborne had a few sweeteners to entice voters at the May 2015 elections such as £1 billion to be raised from stamp duty on houses over £970,000, a new tax regime for foreign companies who currently benefit under the double-tax treaty, and new taxes on non-domicile residents. However, the forecast for tax revenues is £23 billion lower than expected even though Osborne announced £19 billion lower government spending. The Chancellor advised voters to stay on course for prosperity, but he also acknowledged external factors such as the weak Eurozone economy and the strong dollar as elements that may hold the UK economic recovery back.
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