The pound briefly fell against a slew of currencies on Wednesday, after the Office for Budget Responsibility slashed its growth forecast, but recovered swiftly with investors saying that the market impact of the Budget in the long run would be muted.
The OBR said that it now sees the UK economy growing by just 1.5 per cent this year, against a previous forecast of 2 per cent, and 1.4 per cent next year, down from 1.6 per cent.
Sterling initially slipped by around 0.2 per cent against both the euro and the US dollar. It also fell against other major global currencies, including the Swiss franc and Japan’s yen, but was trading higher again by the end of the day.
The pound has endured a turbulent ride since June 2016’s Brexit vote. Even though it’s stabilised somewhat in recent months, it remains around 10 per cent lower against the dollar since the referendum and around 13 per cent lower against the euro.
In the longer term, analysts are cautious about forecasting a sustainable recovery for the currency – especially considering the stubborn uncertainty over what Brexit will eventually look like.
The FTSE 100 index of the UK’s biggest publicly listed stocks was recently up around 0.6 per cent. The index is packed full of multinational corporation that tend to benefit when the pound falls because they generate revenue abroad but have cost bases in the UK.
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