George Osborne releases his budget next week for the year ahead. It has been rumoured today that he will cut the top rate of income tax which currently stands at 50p after a year of lobbying by economists and businesses who disagree with the tax band. If he does reduce the top rate of tax back to 40% then he will have to raise capital another way, which will no doubt be picked up by the middle earners in the form of another tax. Perhaps a better idea would be to increase the tax free allowance or to reduce the tax band for the majority of earners so they have more cash available to put back into the economy. I may be biased of
course but it will be interesting to see what surprises he has for us all and also how the markets react to it. Sterling may drop off if the market does not like what it hears.
The U.S. had a stream of good economic numbers out yesterday with jobs figures continuing to be good and the US looks like one of the best recovering economies at the moment. There is more US data out today with Consumer Price Index figures and Industrial Production out at 12.30 and 13.15 respectively. These are expected to remain steady at the same levels as last month with industrial production expected to be a little higher. A better than expected figure should give the Dollar a boost so look out for volatility around midday.
The European trade balance figure was released this morning at 10.00 and was worse than expected at -€7.6bn showing a trade deficit, we saw the Euro weaken slightly against Sterling off the back of this figure.
The major currencies have been fairly range bound over the last few days but there have been opportunities especially if you are a Euro buyer to get good rates. GBP – EUR has been bouncing between the high 1.19’s and low 1.20’s for a few days now and we wait to see if and when the big push up towards 1.21 will happen. Realistically we would need to see EUR – USD below 1.30 for that to happen but given how close we are to that level it would only take one big position or bad piece of news from Europe to push through that level.
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