FX Budget 2014 Review
The UK Budget is not usually a big FX market mover, but it was Chancellor Osborne’s penultimate budget before next year’s general election and it contained some surprise announcements aimed at the older voter.
This is a demographic that has been impacted heavily since the financial crisis, due to the protracted period of record low interest rates and low pension annuity rates.
The new rules announced by the Osborne mean that individuals are no longer obligated to buy an annuity from an issuance company at retirement age to get an income for the rest of their life.
Instead, under the new rules, individuals will be able to decide what they do with their fund. Insurance companies that rely on pension annuity business fell sharply amid analyst estimates that up to two thirds of the GBP 12B annuities market could be wiped out over the next two years.
Foreign exchange wise, it did little to the markets; the main mover being Sterling and Sterling crosses, but that was on the back of last week’s much stronger Retail Sales numbers for February.
GBP/USD traded north from 1.6560 to 1.6640 very swiftly, and GBP/EUR from 1.2030 to 1.2095 in quick succession also with these gains being held onto into this week.
Market consensus is that the Bank of England (BOE) will be the first in the developed world to hike interest rates.
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