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Pound rises following Reeves' autumn budget speech - YAHOO FIANNCE
BY Vicky McKeever Business reporter
The pound rose against the dollar (GBPUSD=X) on Wednesday, as chancellor Rachel Reeves delivered the UK's long-awaited autumn budget.
Sterling advanced 0.2% to trade at $1.3191 against the greenback at the time of writing, and was 0.3% higher against the euro (GBPEUR=X) at €1.141.
Read more: UK government bond yields jump as Rachel Reeves delivers autumn budget
Reeves announced a raft of tax rises that were set to raise £26.1bn by 2029-30, according to the Office for Budget Responsibility's (OBR) latest forecast, which was published before the chancellor's budget speech in an unprecedented error.
Key announcements included a mooted extension of the freeze on income tax thresholds until the 2030/31 financial year, which is expected to raise £7.6bn by 2029/30.
Reeves also confirmed that salary-sacrificed pension contributions above £2,000 per year would be liable for national insurance (NI), which is estimated would raise £4.7bn in 2029/30.
In addition, the chancellor confirmed that a "high value" council tax surcharge would be applied on properties worth over £2m, which is expected to raise an estimated £400m in 2029/30.
As a result of these budget announcements, Reeves said that she would more than double her fiscal headroom to £21.7bn, from a previous £9.9bn.
Sanjay Raja, chief UK economist at Deutsche Bank, said: "Today’s budget was better than expected on many fronts – while perhaps under-delivering on other parts.
"The good news from a market perspective will be the more than doubling of the chancellor’s fiscal headroom. Cost of living measures will also deliver a modest but meaningful dampening of inflation (0.4 percentage points) – largely as expected, making the Bank of England’s job a little easier next year."
In addition, he said that borrowing "remains broadly on track" to drop below 2% of gross domestic product (GDP) by the end of the decade.
"And the government’s central government net cash requirement looks slightly lower than we projected over the next four fiscal years," he added.
However, Raja pointed out that many of the "consolidation efforts are backloaded – raising questions around both the credibility of such fiscal tightening and whether they will be implemented ahead of the next general election."
Matt Tickle, chief investment officer at Barnett Waddingham, said that despite an immediate dip in the FTSE (^FTSE), the market reaction to the leaked OBR report was "pretty subdued".
