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Feb 21 - 06:55 PM

ING: UK's March 6 Budget as a Potential Wild Card for GBP

By eFXdata  —  Feb 21 - 04:00 PM


ING anticipates the upcoming UK budget on March 6 could introduce significant fiscal stimulus and incentives affecting the GBP's performance. With the Resolution Foundation reporting a £23bn fiscal headroom, the possibility of stimulus is seen as a key factor potentially supporting sterling, despite recent dovish remarks from Bank of England Governor Andrew Bailey regarding inflation and rate cuts. Moreover, the budget could present unexpected elements regarding incentives for UK pension funds and efforts to enhance London's appeal for major financial listings, potentially impacting sterling's valuation.

Key Insights:

  • Fiscal Stimulus Possibility: The UK government's potential to deploy £23bn in fiscal stimulus during the March 6 budget presents a backdrop that could support or influence GBP movements.
  • Impact of BoE's Dovish Signals: Despite Governor Bailey's indication that the BoE might not wait for inflation to reach 2% before cutting rates—a stance that softened UK gilt yields—anticipated fiscal measures could counterbalance bearish pressures on sterling.
  • Incentives for UK Asset Investment: The budget may also explore new incentives aimed at encouraging pension funds to invest in UK assets and enhance London's financial market allure, presenting unexpected variables for GBP dynamics.


The March 6 UK budget emerges as a critical event for the GBP, with potential fiscal stimulus and strategic incentives for domestic asset investment serving as wild cards. While the BoE's dovish tilt has introduced caution, the budget's outcome could significantly influence sterling's trajectory, highlighting the complex interplay between fiscal policy, central banking actions, and currency markets.

ING Research/Market Commentary


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