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Today’s budget has proven largely unremarkable, with the headline giveaways from Phillip Hammond largely falling along the lines of what was widely expected. That being said, there has been a few key takeaways from today’s budget and Office for Budget Responsibility (OBR) forecasts:
- Growth outlook increasingly bleak
It is always going to be difficult for the OBR to truly gauge how much or little the UK economy is going to be hit by the Brexit process. However, today’s substantial growth domestic product (GDP) write-downs from the OBR highlighted that the UK economy is set for hard times, with the current 1.5% growth only expected to be surpassed in 2022. This grim outlook for UK growth represents the main takeaway for markets, with the pound falling sharply in response. Interestingly, the fact that we saw GBP/USD regain those losses through the announcement of a weaker durable goods number highlights that such significant downward revisions are not out of the ordinary. With GBP/USD having traded within a range for the past two months, there is a good chance that this current rebound could be a short-term phenomenon, where trendline ($1.3300) and horizontal ($1.3321) resistance could push the pair lower once more in the near future.