The pound to dollar rate was trading higher on Wednesday morning, as investors awaited the chancellor’s budget statement later in the day. Before then, new industry data showed large swathes of the UK economy contracted more than expected in February. According to IHS Markit’s purchasing managers’ index (PMI) data, the UK’s dominant services sector experienced an overall shrinkage in output last month. Despite coming in below forecasts, the figures represent a marked improvement on the previous month, as more companies expanded trade despite lockdown restrictions, and optimism hit a 14-year high amid the rapid vaccine rollout.
As expected, Rishi Sunak announced the furlough scheme will be extended until September to help businesses recover from the economic blow dealt by lockdown restrictions. Mr Sunak said: “As businesses reopen, we’ll ask them to contribute alongside the taxpayer to the cost of paying their employees. Nothing will change until July, when we will ask for a small contribution of just 10% and 20% in August and September.”
Other measures designed to help the public in the ‘giveaway’ budget include:
Self-employed support will continue, with a fourth grant until April and a fifth grant in May.
The Universal Credit uplift of £20 – which had been due to run out in April – will support lower-income households for a further six months.
The stamp duty holiday has been extended until 30 June.
A new scheme will be introduced helping those attempting to climb the property ladder to secure a mortgage up to £600,000 with a 5% deposit.
The National Living Wage will be increased to £8.91 from April to help those worst off.
The pound vs dollar rate steadied after the announcement of an expansive budget designed to prop up the British economy as it prepares to re-open following the latest lockdown.
Dollar Supported by Hopes of Economic Rebound
The dollar was supported by investor optimism yesterday, with bets on US growth and inflation boosted as the government prepares new fiscal stimulus, and speculation mounts that the Federal Reserve could normalise monetary policy sooner than expected.
According to the ADP National Employment Report, US private payrolls rose by 117,000 jobs last month, missing expectations.
The ISM Services PMI came in weaker than expected in February, although economic activity in the sector continued to expand in February, albeit at a softer pace than the previous month.
The Markit PMI for the UK’s construction sector is forecast to advance into expansion territory today. Meanwhile, a raft of data is scheduled for release in the US, but it is Jerome Powell who will be under the spotlight, with the Federal Reserve Chair scheduled to discuss the economic outlook.
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