Sterling Uplifted as Sunak Previews £5bn Boost to UK Budget

01 Mar 2021 · 3rd Party Analysis

Sterling Uplifted as Sunak Previews £5bn Boost to UK Budget

WRITTEN BY ThorFX

In Summary

  • Chancellor Rishi Sunak announces financial boost for UK companies
  • UK Covid-19 situation continues to improve

The Great British pound moved to the upside during the Asian session and the early hours of the European session on Monday. The UK currency was boosted by the latest announcement of UK Chancellor Rishi Sunak who said on Sunday that help for pandemic-stricken businesses is on the way. Today, Mr. Sunak will officially announce the UK’s budget with a £5bn “restart” grant scheme. The spending is intended to help struggling retailers until the Covid-19 restrictions are lifted.

The grants, reaching up to £18,000, will be directed towards businesses most affected by the pandemic, including shops, hotels, and pubs. Roughly 700,000 businesses are eligible for the high street coronavirus recovery fund. The £5bn boost to the economy will bring the total amount spent on coronavirus relief measures to £25bn since the start of the pandemic.

On Sunday, Chancellor Sunak promised that the financial aid will be aligned with the lockdown exit plan announced by Prime Minister Boris Johnson last month. According to the plan, if the positive scenario is maintained, the UK could be out of the lockdown with all restrictions lifted by June 21. Until that point, Mr. Rishi Sunak vowed to support the UK economy by injecting billions of pounds to sustain the jobs market and keep the economy ticking over.

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“I said at the beginning of this crisis that I would do whatever it took to protect people, families, and businesses through this crisis and I remain completely committed to that,” the Chancellor said. “I want to make sure people realize that we are going to be there to support them and if you look at our track record, we went big, we went early and there is more to come next week.” Chancellor Sunak is expected to announce in the UK’s budget additional support schemes for individuals and businesses that will be available for the time while the lockdown lasts or at least by the end of June.

The UK published its roadmap out of lockdown on Feb 22. The plan is divided into four stages and intends to provide a gradual reopening of the UK economy and social activity. From March to June the country is expected to go through four steps of easing of restrictions, and if all are successful, the country should be back to normal life by June 21.

The numbers of confirmed daily cases and new hospitalizations have been trending downward recently. So far, about 20 million people across the UK have received at least one dose of the vaccine, making the vaccination program an ongoing success.

Meanwhile, on Monday, European markets are in positive territory as investors kick-start the month. Gains across the board came early today as market participants appear to have bought the dip from Friday’s weak market performance. Equity markets in Germany, France, and the UK are all trading higher by over 1.00% with US stock futures pointing in the green. Futures tied to the Nasdaq Composite, the Dow Jones and the S&P500 are all positive with over 1.00% gain each.

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