EURGBP Finds Support as Analysts Doubt the UK Economy

The UK Chancellor has come under threat from economists as he feels the strain on the country’s finances.

EURGBP – Daily Chart

EURGBP – Daily Chart

The EURGBP exchange rate tested the 0.85 level again but has bounced and will look for positive data.

Britain’s Chancellor Jeremy Hunt has been hinting at tax cuts as the Conservative party struggles in polls for the next election.

The Institute of Fiscal Studies has said the chancellor should only go ahead with tax cuts if they provide specific details of where they will come from. The think tank said any tax cuts “should wait” until the chancellor could commit to a detailed spending review.

“We don’t think we should be implementing certain tax cuts now, essentially that is paid for by uncertain spending cuts that might never be delivered,” IFS deputy director Carl Emmerson said.

The IFS added that taxes in the UK were heading to record-high levels when measured against the size of the overall economy. However, government debt was growing and “barely on course” to fall in five years.

The “unhappy outlook” for the public finances was based on spending cuts and tax rises, including an increase in fuel duties and changes to business rates that were “unlikely to be realised”, the IFS continued.

“There is, therefore, only a weak economic case for another sizable net tax cut in the forthcoming Budget,” they said, with a government Budget coming on March 6.

The IFS proposed that if Hunt did want to push for tax cuts, he should look at reforming stamp duty on property or shares rather than reducing income tax or a further cut to National Insurance rates, which were previously reduced in January.

The euro has data released starting at 3:45 pm HKT with French inflation, where a further slowdown to 2.7% is expected. German unemployment is released an hour later, with a continued strain on anticipated jobs in Europe’s largest economy. German inflation follows with a dip from 2.9% to 2.6% expected.

The two economies are in bad shape, but the euro has found some support against the pound and will look to push higher.

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