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George Osborne Autumn Statement

At 12:30pm (London) Chancellor George Osborne will unveil his Autumn Statement at the House of Commons.  This is one of the current coalition government’s few major announcements prior to next year’s general election, and an attempt to sway voters.  This is a fiscal announcement rather than a monetary policy; which is overseen by the Bank of England.

Osborne is under pressure as the current government announced a range of austerity measures during its term in parliament, on the basis of reducing the budget deficit. However as tax receipts have undershot expenditure, the deficit has continued to deepen. The Bank of England currently holds a third of the UK government debt, and is tipped to begin tightening policy, and raising interest rates in the second half of 2015.

Key policies expected

As is a proportion of the Autumn Statement has been tactically leaked to the press prior to the speech.

£15bn investment in roads and rail infrastructure to increase connectivity

1 year extension to the Funding for lending scheme

£900m investment in SME’s

Extra funds for flood defences circa £2.3bn

Rumoured announcements:

Changes to the current tiered stamp duty on property purchases

Business rate reforms to help the flailing high street

Hike in the nil threshold for inheritance tax to £1m from the current £325K

Capital gains tax for overseas property owners (non-domiciled)

GBP

In the FX markets GBP has been weak against the USD on the back of Dollar strength. During the speech any unexpected announcements could move the pound. The statement needs to be business and deficit friendly to benefit the pound. Ahead of the release, cable is traded to a 14 month low 1.5667, traders will await the forecast for the budget deficit and whether this has reduce from last year. 

Individual business sectors (components of the FTSE) might be impacted more significantly, due to a change in regulatory status or the future growth prospects.

General Election 2015

The General election will be held on 7th May 2015. The current UK government is a coalition between the Conservative Party and Liberal Democrats. Analysts have noted the risk of a political stalemate, and the likelihood that there won’t be a single party in power in the next seating. There is a concern that the current majority (Conservative Party) who are seen as “business friendly” could be ousted, with a combination of much smaller parties (UKIP, Liberal Democrats, SNP etc.).  

The key policy that traders will be following is the potential of a Brexit (British exit of the EU), the potential impact on GDP going forward.  

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