The main GBP risk this week is the Chancellor's Autumn statement on Wednesday. What can we expect?
The Autumn statement from the UK's Chancellor is pretty much a half-time report on the prior budget alongside a trailer of what's to come.
Usually it's not really market moving but coming after the referendum vote, there's going to be a bit more scrutiny than usual.
Initially there was some expectation that Hammond would roll out some heavy plans to help soothe the UK economy through Brexit but over the last few months that's been played down. While we don't get chapter and verse on all parts of the budget, we will get some idea of the plans he will be looking to put in place. So far he's already said that homebuilding will be getting some cash with some £3-5bn touted. It's also expected that he will try to tackle one aspect of Brexit by leaning towards greater public spending on infrastructure, rather that taking the hatchet to corporate taxes.
If lowering taxes are off the table, that might be one negative for the pound. Traders will be looking for good reasons why the UK will remain business friendly and thus stop firms jumping ship to other countries. A good old tax cut for them would be one sweetner.
It's being mooted that he might touch on stamp duty, which was raised and changed to capture more dough from the high end of the market and those with second properties. That and Brexit worries have been a double whammy for foreign investors and why that part of the market has slowed. It's an easy route to take to keep and encourage foreign money to stay or come back to the country.
The big issue with this event is that whatever positive ideas he comes up with, the price tag is going to counter that. He can spend away to his heart's content but that will mean more borrowing, and that news might trump whatever grand ideas he has. The big question is whether the market will "buy" into his plans, or "sell" them down the river on the higher borrowing/spending numbers. In this instance I'm thinking the market might give him a pass on the costs if they deem his actions to be worth more to the economy in the long run, can help carry the UK through Brexit, and whether they are actually achievable.
Unless we get something really big like massive tax cuts and big targeted spending that will really make a difference, I can't see us getting any big moves in the pound. We're more likely to see a bigger move south on disappointment than a move north on positive vibes.
Unfortunately, Hammond will be sober (hopefully) for this statement. In one of those quirky ye old UK laws, the Chancellor is allowed to drink alcohol throughout the main budget but not this Autumn statement. Some might say most Chancellor's must have been half cut with some of the things they've come up with in the past but I digress ;-)
We'll have full coverage of the statement live from Parliament and there will be links so you can watch it live. Expect a packed house and lots of cheering and bleating in the way only UK politicians can do. The statement will start around 12.45 GMT but it will be worth looking in from 12.00 for Prime Minister's questions.
Going into battle with his little red case.
