The UK emergency budget delivered yesterday has stoked appetite for sterling. GBP/USD hovered around the $1.49 level this morning, up 1.36% from the levels seen before the televised budget, suggesting the market has faith in the new government’s plan to rein in the public finances without derailing the UK economic recovery. A preliminary assessment conducted by Fitch Ratings yesterday has given the budget the thumbs up, stating that the budget ‘sets out an ambitious deficit reduction path that, if delivered upon, will materially strengthen confidence in UK public finances and its 'AAA' status.’ [1] Elsewhere, the BoE minutes released this morning saw a divide among committee members in their views of when to raise interest rates. Policy-maker Andrew Sentance caught the market off guard, voting for a 25 basis-point increase in interest rates on fears over rising domestic inflationary pressures. ‘Despite current uncertainties, for this member, it was appropriate to begin to withdraw gradually some of the exceptional monetary stimulus,’ the minutes stated. ‘Other members thought that changes to the balance of risks were insufficient to warrant a change in the stance.’ [2] Anthony Grech, London

 

Notes: [1] Fitch Ratings (23 June, 2010), [2] Bank of England minutes (23 June 2010) [3] Bloomberg News (23 June 2010).